Abstract

Financing in Europe — Capital Market, Financial Industry and Monetary Policy Perspectives

The single European market for financial services is to have been completed by December 31, 1992, as part of the programme for building the internal market. The decisions to liberalize capital movements and to harmonize credit, insurance and stock exchange supervisory regulations and a uniform EC-wide regime for taxing returns on capital are to complement each other in the creation of the single European financial market. As a result, decision-making will increasingly be lifted from the national to the EC level. However, the scope for discretion, which Member States customarily use when transforming EC directives into nationallaw, and special arrangements to the advantage of individual Member States contained in directives will be responsible for imperfect markets also in future. Continuing differences in tax legislation will lead to additional advantages/disadvantages of specific locations. Reduced administrative barriers will make Europe’s financial markets grow together in the long run which means a rapprochement of competitive conditions. The geographic distribution of the European trade in securities in the past shows very clearly that restrictions on capital movements tend to isolate markts from one another rather strongly. For this reason, the elimination of restrictions on capital movements is an essential prerequisite in cross-border supply and demand of financial services. A genuinely complete and irrevocable liberalization of capital movements and a single European financial market will bring substantial pressure to bear toward integration and represent a monetary policy vehicle toward an economic and monetary union. For this reason, there will be mounting pressure for monetary policy coordination also in future.