EU countries must back plans that would strip them of their powers to police stock exchanges and other key institutions if they are serious about building a U.S.-style financial market, the EU’s finance chief told POLITICO.

“If we don’t do anything different from the past, we will hardly get to any different result,” Financial Services Commissioner Maria Luís Albuquerque told POLITICO in an interview. “So if there is support, well, let’s walk the talk then.”

The Portuguese commissioner’s challenge to the rest of the EU could fall flat. EU treasuries are already up in arms over the controversial power grab, which would shift supervision of large, cross-border financial services companies, such as stock exchanges and crypto companies, from the national level to the EU’s securities regulator in Paris.

“It’s going to be a difficult discussion, of course, but these are the ones worth having, right?” Albuquerque said. “What I have been hearing since I arrived is tremendous support for the savings and investments union. Well, this is about delivering it.”

The European Commission is primed to propose a sweeping package of financial markets reforms on Dec. 3, including the supervision plans, in a bid to revive Brussels’ faltering decade-long campaign to create a U.S.-style capital market.

According to plans first reported by POLITICO, as well as draft documents outlining the proposal, the supervision plan would considerably strengthen the European Securities and Markets Authority (ESMA) to police the likes of Nasdaq Europe and Euronext. The draft also proposes making the future watchdog independent of meddling EU capitals.

Although the main aim of a single watchdog is to boost the EU’s economy by making it easier for finance firms to operate and invest across the EU’s 27 countries, having money flowing so freely around the bloc would also create new risks without strong oversight.

In the event of a meltdown of a firm, such as a clearinghouse, that operates across multiple countries, an EU watchdog could be quicker to jump on the problem than a group of national supervisors acting independently.

The focus on boosting Europe’s capital markets has gathered pace since the pandemic’s bruising impact on national budgets, compounded by the EU’s desperate bid to keep pace with the economic powerhouses of the U.S. and China.

With strained public finances in the EU’s member countries and the loss of London as the bloc’s financial center post-Brexit, policymakers are trying to unlock €11 trillion in cash savings held by EU citizens in their bank accounts to turbocharge the economy. Having a vibrant capital market would also offer EU startups the chance to raise cash from risk-minded investors, rather than approaching the bank with a cap in hand.

“We need a single market,” Albuquerque said. “We need the scale, the opportunities that that brings, because that’s the only thing that can deliver on our ambitions.”

Trouble ahead

Political negotiations on the proposal are set to be fraught. Smaller countries that depend on their financial services industries, like Ireland and Luxembourg, oppose the plans as they fear ceding oversight or finance firms relocating to be closer to ESMA — an added boon for the French. Others argue that the move for an EU watchdog will distract from the bigger picture of encouraging savers to invest in the markets.

“If the European Commission wants to be successful in this aspect of enlarging the pool of investable capital, this is what you need to do,” Swedish Finance Minister Niklas Wykman told POLITICO. “If we’re stuck in a never-ending discussion about how to organize supervision … that will not take us closer to our objective.” 

Sensing the challenges ahead, Albuquerque said she was open to compromise to ensure the proposals don’t land dead on arrival. “I’m not saying that we will have to find an agreement which is exactly like the Commission proposal,” she said, adding that “if there is a better alternative, I’m all for it.”

CORRECTION: This article was updated on Nov. 17 to clarify that policymakers are specifically targeting the €11 trillion held in bank accounts in cash.