German Chancellor Friedrich Merz is calling for a unified European stock exchange for simple economic and strategic objectives, all pertaining to increasing European competitiveness and re-booting the German economy.

The push for a single stock market and broader Capital Markets Union (CMU) comes ultimately from a desire for economic outcomes for the EU comparable to those of the US, but does not suggest the EU will become a political replica of the US.

A number of reports cite German Chancellor Friedrich Merz as having called for a “European stock exchange” in a speech to the Bundestag on a Thursday, just ahead of an EU summit. His quoted arguments for preventing successful companies such as biotech firm BioNTech from being listed in New York due to the disunited European market are also consistently reported.

The most significant and reality-close news is the news that Germany has shelved its previous hesitation to hand over supervisory authority. The search results confirm that the government of Germany, under the leadership of Finance Minister Lars Klingbeil, showed that it would agree to give up more authority to the European Securities and Markets Authority (Esma) as part of its intensified cooperation with France on the CMU. This is described as a “major shift” and a measure that would remove a “major hindrance” to the CMU.

Merz’s proposal is to boost the German economy and close the gap in productivity with the US and China, citing reports by former Italian premiers Mario Draghi and Enrico Letta which is also claimed by another news agency.

Euronext CEO Stéphane Boujnah, welcoming Merz’s call and promoting single supervision by Esma, is confirmed in an emailed response to Reuters, according to other sources. Deutsche Börse’s statement regarding fragmentation of markets is also confirmed.

The search results quote the pre-cursor efforts to the CMU in progress, like that of the European Commission’s planned proposals to grant ESMA greater supervisory roles over a selected group of entities. The recent opposition of Germany to Esma regulation of crypto is an accurate detail consistent with the fine-grained character of such negotiations in the works.

Stopping the Exodus of European Companies

• The Problem: The most compelling direct argument Merz had was that thriving European companies such as the German biotech firm BioNTech are deciding to have their initial public offerings (IPOs) on the New York Stock Exchange (NYSE) instead of on a European exchange.
• The Aim: There should be a single big, liquid European exchange that would be an appealing, world-class listing point so that European wealth, influence, and “value created by German and European research” remain in Europe.

Deepening the Capital Market to Drive Growth

• The Problem: European capital markets are highly fragmented, with many small and illiquid national stock markets. The fragmentation makes it more expensive and challenging for companies to raise large amounts of money quickly, especially high-growth and tech firms.
• The Goal: The integrated stock exchange would create a “sufficiently broad and deep European capital market” which is capable of financing European companies “better and, first and foremost, faster.” This greater liquidity and larger pool of investors would lower the cost of capital, enabling firms to invest and expand more conveniently.

Implementing Core European Reforms

Merz’s initiative is just a part of a broader, accelerated push to complete the Capital Markets Union (CMU). The single market idea has been EU’s aim for a long time to accompany the single market for goods but has languished in the doldrums for years.

Merz cites verbatim from the submissions of ex-Italian Prime Ministers Mario Draghi and Enrico Letta, who were mandated to advise on how Europe can regain its competitive edge over other global competitors like the US and China. The submissions definitively state that Europe’s economic destiny depends on merging its financial and service markets. Merz emphasizes that the US growth gap is brought about by low productivity growth, and this can only be addressed by fundamental change, including the end of “regulatory frenzy.”

The suggestion is important as it marks a considerable shift in Germany’s position. Germany was initially a strong critic of transferring supervisory power from its national watchdog (BaFin) to the EU regulator (ESMA).

By supporting one exchange and one European supervisor, Merz is sending a signal that Berlin will trade national sovereignty to gain the larger economic prize of a unified, powerful European financial market. The political imperative in this case is to unlock the CMU and demonstrate German leadership on economic reform.

The creation of a single stock exchange is a technical and regulatory harmonization under the existing regime of the Capital Markets Union. It will require member states to cede some financial regulation powers (like supervision and some technical rules), but they are not sacrificing fundamental political powers such as their national tax systems, social security programs, or foreign policy in order to form a single nation.

To be a stronger economic competitor against the US, EU needs to borrow its financial model’s size but isn’t going in the direction of being a single political state like the US.