French President Emmanuel Macron made his second ‘Sorbonne’ speech, outlining his vision for Europe in a more somber tone than before. Despite periodically stating that he had spoken for too long, Macron continued for an additional twenty minutes. Comparing this to a previous Sorbonne speech by Jack Lang, it was noted that there are votes in culture, but grand ideas on geopolitics or finance may not have the same impact.
While Macron is one of the few European leaders capable of setting out a vision for Europe, some aspects of his speech, such as making Europe a world leader in technologies like spacetech and AI by 2030, may not be credible. The question of who will finance these new technologies remains unanswered, as Europe is less well-equipped than the US to fund such advancements. The capital markets union (CMU) was launched in 2014 to address the need for Europe to become more dynamic financially, but progress has been slow.
Despite the urgency conveyed in Macron’s speech, EU leaders have hesitated to accelerate the capital markets union, citing potential costs on local asset managers. French officials like Macron, Lagarde, and Le Maire are among those pushing for CMU, highlighting the ironies of the situation. The US economy has outpaced Europe significantly, emphasizing the need for European countries to acknowledge the importance of finance in fueling innovation and business operations. Private capital, including investments from outside Europe, may be needed to fund the technology infrastructure of the future.
There is speculation that loosening investment regulations to allow professional investors to access infrastructure and private equity segments, as well as increasing investments from state and semi-private pension funds in private equity, could be potential solutions. This could lead to a shift in governance, with pension funds becoming more active and increased public representation on boards. Such changes may be more effective than forcing pension funds to hold more government bonds, ultimately benefiting the development of Europe’s technology infrastructure.
In conclusion, the urgent tone of Macron’s speech highlights the need for Europe to address its financial challenges and align its regulations to foster innovation and economic growth. The reluctance of EU leaders to accelerate the capital markets union is a setback in this regard, but there are potential solutions that involve leveraging private capital and reshaping governance models. As Europe seeks to compete globally in key technologies, a strategic approach to finance and investment will be crucial in achieving long-term success.
