The finance ministers of Germany, France, Italy, Poland, Spain and the Netherlands have backed a move towards stronger EU-level supervision of capital markets, increasing pressure on smaller financial centres that have resisted transferring powers to Paris-based ESMA.
The European Union’s six largest economies have agreed to support a more centralised model of capital-markets supervision, in a move that could shift regulatory power from national authorities to the European Securities and Markets Authority in Paris.
The agreement by Germany, France, Italy, Poland, Spain and the Netherlands marks a significant step in the EU’s long-running attempt to build deeper capital markets and reduce its dependence on bank lending. According to Reuters, the six finance ministers agreed that supervision of significant market infrastructure should gradually be transferred to ESMA.
The decision matters because the six countries represent roughly 70 per cent of the EU’s population, giving them enough political weight to shape the outcome of negotiations in the Council if they remain aligned. Their position also changes the balance in a debate that has repeatedly stalled over national resistance to centralised supervision.
At issue is one of the most sensitive parts of the EU’s effort to create a genuine single market for capital. Brussels wants more of Europe’s private savings to move into productive investment, including start-ups, infrastructure, clean technology, defence, digital industry and listed companies. The European Commission has framed this agenda through its Savings and Investments Union, arguing that fragmented markets leave European companies too dependent on banks and too often reliant on US capital when they scale up.
The political problem is supervision. Trading venues, central securities depositories, clearing houses and other parts of market infrastructure are currently overseen largely at national level. A more centralised model would give ESMA a stronger role in supervising major cross-border financial-market infrastructure. Supporters argue that this would reduce fragmentation, lower barriers to cross-border finance and make Europe more competitive. Opponents fear a loss of national control, regulatory disruption and an advantage for larger financial centres.
Germany’s position is particularly important. Berlin has previously been cautious about transferring financial supervisory powers to the EU level, but German Finance Minister Lars Klingbeil signalled this week that Germany was ready to compromise. The Financial Times reported that Klingbeil’s stance represented a shift from previous German reluctance over stronger ESMA powers, while Reuters reported earlier in the week that he wanted progress on capital markets union to strengthen Europe’s economic sovereignty.
That shift reduces the room for smaller financial centres to block or dilute the proposal. Ireland and Luxembourg have been among those wary of giving ESMA greater supervisory authority, partly because both host significant fund and financial-services activity. Their concern is that centralisation could weaken the role of national regulators and alter the competitive position of established financial centres.
The E6 agreement does not settle all details. Questions remain over which entities would fall under ESMA’s direct supervision, how quickly powers would be transferred, how ESMA would be staffed and funded, and how national authorities would retain a role. The six ministers also emphasised the need for accountability, efficiency and geographical balance in ESMA’s governance, signalling that the final model will still require negotiation.
The wider stakes go beyond financial regulation. Europe’s capital-markets weakness has become a strategic concern. The EU has large household savings, but much of that money remains in bank deposits or flows into markets outside Europe. At the same time, European companies often struggle to raise capital at scale, contributing to a gap with the United States in technology, venture capital and equity financing.
Mario Draghi’s 2024 competitiveness report sharpened that argument by linking fragmented capital markets to Europe’s broader investment shortfall. The capital-markets agenda has since moved from a technical financial-services file to a central part of the EU debate on competitiveness, industrial policy and strategic autonomy.
There is also a political timing issue. The Commission has been pushing to advance its capital-markets package this year, while member states are under pressure to show that they can deliver practical measures to improve Europe’s investment climate. The E6 position gives the project momentum, but it also raises the prospect of a more open confrontation with countries that view supervision as a national competence.
For Brussels, the agreement is useful because it gives political backing to a proposal that has long been discussed but rarely advanced. For Paris, where ESMA is based, it strengthens the case for a larger EU supervisory role. For smaller financial centres, it increases the pressure to negotiate safeguards rather than resist centralisation outright.
The central question now is whether the E6 can turn political alignment into legislation. If they do, the EU’s capital-markets project could move from repeated declarations to a more concrete transfer of supervisory power. If the agreement is weakened in negotiations, it risks becoming another example of Europe identifying its investment problem without resolving the institutional barriers behind it.
Either way, the Berlin agreement has shifted the debate. Capital markets union is no longer only about mobilising private savings. It is now also about who controls the infrastructure through which Europe’s financial future will be built.
