Europe s Chimerical Capital Markets Union

Domestic capital markets were non existent.

Financial markets did well through capital market liberalization.

a. avoid destabilising capital flows to maximise benefits from globalised capital markets, thereby minimising risk

International capital markets already have curtailed credit to these countries.

The SOEs compete in product and labor markets with the private sector, but less so in capital markets.

Confidence returned, capital flight from Latin America was reversed, and capital markets became willing to provide financing again.

The banking system remains unhealthy and fragile capital markets are dying.

The notion that capital markets could self regulate was decisively rejected.

But before delving into institutional issues a favorite topic of EU veterans one should consider what problem the capital markets union is supposed to solve. And here, there is considerable agreement.

American officials countered that the financial inflows reflected Europe s underdeveloped capital markets.

Emerging markets should cope with inflows by finding ways to use foreign capital more effectively, which involves strengthening domestic financial markets.

Our capital markets are sufficiently sophisticated and sufficiently deep that most large corporations have plenty of alternative ways to find capital.

Rating agencies have been and should remain an important aspect of modern capital markets.

Both investors and publicly traded firms are operating in increasingly integrated global capital markets.

First, most emerging markets feel their currencies pressed to appreciate by growing capital inflows.

South African firms have used their relatively lower cost of capital to invest in other African countries where capital markets were not developed.

More fully integrated capital markets, to provide project capital and investment funds, are required in order to improve the whole infrastructure of the region.

Witness the surge in capital flows to emerging markets as investors chase higher financial returns.

In this respect, they require institutional and technological capacity, access to markets and financial capital.

Similarly, time inconsistency issues prevent large international firms from compartmentalizing their markets.

Brady s plan looked like a great success. Confidence returned, capital flight from Latin America was reversed, and capital markets became willing to provide financing again.

They were then punished for a few years by not having access to international capital markets.

This has increased the vulnerability of many emerging markets to a sharp reversal in capital flows.

The Fund has no instrument to provide short term liquidity to emerging markets facing capital volatility.

Development of capital markets needs to be supported through a series of reforms at various levels.

Assistance in capacity building could help municipal authorities in laying the groundwork for accessing capital markets.

Finally, local currency bond markets and, more generally, domestic capital markets in emerging economies must be explored further, in order to lengthen the tenure of financial flows.

The consequences of abnormal capital flows into China are becoming increasingly apparent, particularly in foreign exchange markets.

Greece benefited from a common currency, unified capital markets, and free trade with other EU member states.

But it is inducing massive capital flows to emerging markets, where they are generating asset price bubbles.

While Greece has virtually forfeited its access to capital markets, Germany has never borrowed on better terms.

Five years after Enron and WorldCom, the capital markets are well into a cycle of unprecedented vigor.

As in continental Europe, productivity has suffered from a combination of insufficient profitability and dysfunctional capital markets.

Moreover, some debtor countries which have gone through debt restructurings soon resumed their access to capital markets.

African countries must restructure their domestic financial sectors and develop capital markets and non bank financial institutions.

They do not need paternalism they need training of human capital and access to markets and technologies.

Moreover, there is good reason to see inflows into emerging markets as an opportunity to strengthen domestic capital markets, rather than primarily as a threat to financial stability.

None of this is to say that the risks of foreign capital flows have evaporated, and that emerging markets should throw open their capital accounts all at once.

The Depression had rendered capital markets incapable of absorbing large quantities of government (or, indeed, any other) debt.

A larger capital stock would mean thicker markets, a finer division of labor, and a more productive economy.

Sovereign obligations, such as bonds, are commonplace in the capital markets, and demonstrate strong investor demand and confidence.

A eurozone breakup (including a Greek exit and loss of access to capital markets for Italy and or Spain).

So far, confidence building measures have been limited to financial markets, through public guarantees, liquidity support, and capital injections.

Lacking well developed capital markets as an alternative source of credit, bank funding channels are especially vital in Asia.