EU Single Market Report Calls For “a clear strategy to bolster private equity and venture capital” as essential.

The former PM of Italy, Enrico Letta, has released a report on how to improve the EU single market. The 147-page document, called “Much More Than a Market,” is a “call to action” to improve upon the single market and monetary union.

Letta states that “Allowing EU companies to scale up within the Single Market is not just an economic imperative but also a strategic one.”

He bemoans the lack of integration within financial services as well as other sectors of the economy. The “urgent need” to integrate is how the EU will compete with the US and other countries such as China. Simplifying regulations is key. A lack of support for business is also compelling some to relocate outside the EU.

The need to improve the environment for private capital is mentioned multiple times throughout the document, as this is the area “where the EU is most lagging behind.”

Letta states:

“Special attention should be directed towards fostering a culture of capital market utilisation among SMEs. Additionally, a clear strategy to bolster private equity and venture capital is essential. Sound public capital markets necessitate a robust surrounding ecosystem, including strong private capital markets – particularly venture and growth capital – to provide funding for companies across their lifecycle.”

He states there is a need for a “clear strategy to bolster private equity and venture capital is essential. Sound public capital markets necessitate a robust surrounding ecosystem, including strong private capital markets – particularly venture and growth capital – to provide funding for companies across their lifecycle.”

Access to capital from public listings is a challenge as:

“…many EU start-ups are confronted with the following problems. Firstly, they realise that no national Stock Exchange in the EU is large enough to raise the capital they need at speed and in a cost-effective way compared with the USA (where pools of long-term capital are much larger and where NYSE is competing with NASDAQ by offering attractive listing fees). Secondly, they see that market valuation – amount investors are paying above the ‘floor price’ set to buy new shares – in EU countries is much lower than in the USA (often up to 40% lower).”

He advocates specifically for a  the “creation of an EU Deep Tech Stock Exchange.”

Another issue is “tax fragmentation,” as there are 27 different tax regimes.” There is no mention of the need for taxation to compete on a global scale – not just harmonization within the EU market. Letta does say tax competition is harmful within the EU. He seeks to simplify the existing complexities while reducing “internal fiscal competition” in the EU.

In the end, Letta calls for the European Commission to handle the task of drafting a comprehensive Single Market Strategy, to “break down existing barriers, promote consolidation, and enhance the competitiveness of the Single Market.”

It is a tall task. While acknowledging that “Europe grapples with the challenge of keeping pace with swift global advancements” due to shortcomings in technology, there are no mentions of Fintech and the benefit of innovations in financial services.

You may read the entire document here.


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