Since the introduction of the Euro, Europe’s financial markets are often regarded as highly integrated. The study clarifies that this is not true, in particular with regard to retail financial services. The study was presented to the public in the weeks before the European Council of Barcelona in March 2002 with presentations in Brussels and London. The project design was characterised by a focus on retail financial services where there still are substantial obstacles to integration. Less attention was paid to the already highly integrated wholesale markets. The analysis of specific retail markets has shown that markets like mortgage credits, online-banking or investment funds are still characterised by national fragmentation. This incomplete integration is costly, in particular for the private consumer. In the course of the project it was possible to quantify the extent of some of these costs – with the result that the magnitude is substantial. A further central objective of this study was to assess the reasons behind the continuing imperfections of the financial internal market. Two classes of obstacles have been identified. On the one hand there are unchangeable natural factors like differences in language and culture. On the other there are also important obstacles that could be dismantled. Examples are tax discriminating practices or national consumer protection regulation which is sometimes misused for protectionism. The economic policy conclusions are straightforward: Political initiatives like the Commission’s Financial Services Action Plan point into the right direction. A more advanced level of integration is advantageous not only for consumers but it would in addition also increase Europe’s growth potential.

Selected Publications

Monographs, Contributions to Edited Volumes

Cecchini, Paolo, Friedrich Heinemann and Mathias Jopp (2003), The Incomplete European Market for Financial Services, ZEW Economic Studies, LLL:citation.label.volume 19, Physica-Verlag, Heidelberg/New York.