The Big Question: Has Europe improved its competitiveness since the Draghi report?
“Member states would feel much more comfortable about ceding power to supranational European regulators if they thought they were pro-growth,” said former commissioner Lord Jonathan Hill.
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00:03You have to work out if the most important thing to you is politics or economics.
00:07I think that world has gone and I don't think it's coming back.
00:17Welcome to The Big Question, the series from Euronews where we tackle some of the biggest issues on the business agenda.
00:24I'm Eleanor Butler and today I'm joined by Lord Jonathan Hill, former EU Commissioner for the Capital Markets Union and Financial Advisor.
00:34So there's been a lot of discussion over the past year about boosting EU competitiveness.
00:40How do you think that's changed since the Draghi report was published at the end of 2024?
00:46I think it hasn't changed enough and I think you need to put the debate in Europe about competitiveness and growth
00:52in the broader context of what's happening in other parts of the world.
00:56And when I see the speed with which in America they are changing their approaches to regulation,
01:02generally on financial services, on industry more broadly,
01:06I think Europe is going slower than it needs to go.
01:09And I think the speed of change in America, to some extent in the UK,
01:15is making this problem for Europe all the more urgent.
01:22Tell me exactly what financial competitiveness means for you when we're talking about the EU.
01:30So first of all, you want to be able to attract more companies to come to the EU and grow in the EU
01:40and employ people in the EU in order to provide more jobs for people,
01:46help them have more savings for their old age and also to generate more wealth.
01:53You can then invest in the growth of the economy.
01:57Most of the finance in Europe for investing in companies,
02:02for lending money to companies so they can grow, comes from the banking sector.
02:06And if you don't have the conditions in Europe that encourage those banks to lend money to European and other businesses
02:16to help start-up businesses or existing SMEs to grow more,
02:22then you don't get that employment, the wealth, the savings.
02:26When I look at the position of European banks today,
02:31compared with when I was here 12 years ago,
02:34they're weaker today. Back then, the European economy was bigger than the US.
02:39I mean, going back to about 2010, and now it's not.
02:42If you had to pick specific areas of improvement, what would they be?
02:48I think the debate generally about regulation in Europe is a couple of years behind where it needs to be.
02:57So I think the regulators and supervisors in Europe are still behaving as though we're operating in the old world,
03:05where we had one set of rules across the whole world,
03:08and then everyone was going to converge around those rules.
03:12I think that world is being blown up around us in real time by President Trump and the Americans.
03:20Today, where Europe's biggest problem is lack of growth,
03:24are the judgments we'd make today the same as the judgments we made 10 or 12 years ago,
03:29where our biggest worry was about financial stability.
03:32I would argue that we would make some different judgments now because the problems are different.
03:38But too often, I think, in the regulatory world, they don't want to have the discussion.
03:45And both the Capital Markets Union and the Banking Union have been in the works for a very long time.
03:51How far off completion, in your opinion, are we?
03:54So the Banking Union, I think we're nearer completion.
03:58There's the European Deposit Insurance Scheme, which has still not been put in place,
04:02and we were talking about that when I was here 10 years ago.
04:05And that is politically very difficult.
04:07The Capital Markets Union, in order to make it happen,
04:10you have to tackle some of the things that go to the very heart of the rules and laws that individual countries have.
04:19And so those speak to things about identity and nationhood.
04:25And as we know, right across Europe and in my own country,
04:30issues of identity and nation are what are driving a huge amount of the politics in all our countries.
04:40Do you think that one of the solutions to this could be promoting the idea of being European
04:47as opposed to, or I suppose in conjunction with feelings of nationalism?
04:51Member States would feel much more comfortable about ceding power to supranational European regulators and supervisors
05:02if they thought those regulators and supervisors were basically pro-growth and there was proper accountability.
05:11I think their fear is, what if the regulator is a nightmare to work with?
05:17And what if they're very heavy and they make it difficult for us to do our business?
05:22So that's why I would argue that how you think about regulation, supervision, deregulation, simplification,
05:31is actually part of how you take forward the savings and investment union and the banking union.
05:38If people feel confident, the centre, there'll be people who are operating in a responsible way,
05:47but in a way that can facilitate growth and understands the importance of competitiveness,
05:52I think the argument about centralisation becomes easier to make.
05:56And you're a European Commissioner before Brexit and you are a British politician.
06:02What type of relationship would you like to see between the UK and the EU's Capital Markets Union?
06:08You have to work out if the most important thing to you is politics or economics.
06:13So from an economic point of view, I think having a strong capital markets in London
06:19has proved still helpful to European businesses because they're able to get investment at lower costs through London
06:31than they would if you didn't have a strong deep capital markets on your doorstep.
06:37It makes sense for Europe, I think, and the UK, London to cooperate
06:44because it doesn't seem to me likely that Europe is going to be able to develop a single centre
06:50that is going to be able to challenge New York any time soon.
06:54The story of the last 10 years has been no one else in Europe, I'm afraid, has become a global financial centre.
07:00The main beneficiary of Brexit from a financial centre point of view and financial service point of view has been New York.
07:08It's not been anyone in Europe.
07:10Some centres in Europe have done a little bit better, London has done a little bit worse.
07:15The big winner has been America.
07:17So I think there is a clear practical case for UK and EU to carry on working together more closely.
07:26The politics of that are not straightforward and I think it will take some time before I think people in Europe feel that they can take that step.
07:38Certainly from a British point of view, they'd be very keen to talk about that starting tomorrow.
07:43Fascinating. That's all we have time for, but thank you so much for sharing your insights and for coming on The Big Question.
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