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Germany’s brake on European capital-market development

Grahl, J. & Lysandrou, P. (2018). Germany’s brake on European capital-market development. European Journal of Economics and Economic Policies: Intervention, 15(3), pp. 364-381. doi: 10.4337/ejeep.2018.0034


In February 2015, the European Commission published a Green Paper in which it put forward the goal to ‘build a true single market for capital’ for all European Union member states by 2019. The present paper argues that there is no realistic prospect of achieving this goal given that the Green Paper omits any reference to a formidable impediment blocking a European capital-market union: the German government’s stance on debt. The inescapable fact is that this government’s reluctance to increase the supply of its bonds is depriving the European capital market of one of the essential ingredients necessary to its enlargement on the one hand and to the efficiency of its operation on the other: the former because capital-market enlargement crucially depends on attracting institutional investors who must hold a substantial proportion of their bond portfolios in the form of safe government bonds; the latter because the efficient functioning of the capital markets crucially depends on the efficiency of the money markets where safe government bonds are by far the most important form of collateral.

Publication Type: Article
Additional Information: This is a draft article. The final version is available in European Journal of Economics and Economic Policies: Intervention, published in 2018, Edward Elgar Publishing Ltd The material cannot be used for any other purpose without further permission of the publisher, and is for private use only.
Publisher Keywords: Germany; debt brake; European capital-markets union
Subjects: D History General and Old World > DD Germany
H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
Departments: School of Policy & Global Affairs > International Politics
Text - Accepted Version
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