Taming European Finance: Stability, Efficiency and Inclusion

A large and well-functioning European financial market could be a considerable achievement for the European economy and beneficial for the European Social Model. It promotes financial stability, facilitates access to the payment and credit system for individuals and enterprises and contributes to efficient economic development while giving better services to consumers. But integrated financial markets do not automatically generate these positive effects. As argued in Chapter 4, the current, almost exclusive, concentration of financial market policies in the EU on size, speed and the reduction of transaction costs is working in the opposite direction — towards instability, economic inefficiency and social exclusion. To ensure the positive effects of a single financial market in Europe a political framework for, and political intervention into, the market mechanism are required. This applies to all EU members, and especially to the new members of the EU, whose financial systems are comparatively underdeveloped and largely in foreign hands, increasing their vulnerability (see Cavaglia et al., 2002, pp. 15–30). Financial stability needs strong supervision of financial institutions and safeguards against both monetary chain reactions and excessive financial speculation. Efficient economic development requires the continuous provision of credit to a broad range of firms and to public institutions pursuing regional and structural development goals not served by markets. Social inclusion in