Roughly nine thousand members of the global finance community gathered in Singapore last week at a conference devoted to ‘market infrastructures’ – meaning the plumbing (communication, clearing, settlement, depository) that makes finance work. On one level it was a very geeky affair with its own confusing jargon. The name of the conference, SIBOS, refers to another acronym, SWIFT. There was a whole forum devoted to standards – which are precise definitions for how things should look and work. If you wanted to fill a room, all you had to do was shout ‘block chain’ or ‘distributed ledger’. But the buzz was not only about technology. You could pack the room talking about China’s strategy to internationalize the renminbi just as easily. Market infrastructure is about power as well as plumbing. More important, the power and the plumbing tend to work at cross purposes.
The goal of the capital markets union is to make European financial market integration more efficient. Firms will be able to gain access to international credit (and other forms of capital) directly from the market rather than having to rely on banks for intermediation; savers will be able to gain access to cross-border investment opportunities without facing high transaction costs.
It is no secret that Europe is facing multiple crises. Migration, deflation, Greece, and Ukraine top the list, but the issues that come after are no less challenging for being less prominent. Let’s not forget, Europe was ‘in crisis’ at the turn of the century and before any of these headline issues emerged. That earlier agenda – which includes population aging, welfare state reform, energy security, industrial change, market competition, and connecting ‘Europe’ to ‘the people’ – still needs to be addressed. Then as now the two questions are whether Europe will hold together and whether European leaders will energize and focus that unity with a sense of purpose. Unfortunately, increasing accusations of ‘arrogance’ suggest that neither unity nor purpose should be expected.