Christine Lagarde: A Kantian shift for the capital markets union

Speech by Ms Christine Lagarde, President of the European Central Bank, at the European Banking Congress, Frankfurt am Main, 17 November 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

In 1844, the American poet Ralph Waldo Emerson observed that "railroad iron is a magician's rod in its power to evoke the sleeping energies of land and water."

What he saw was that railroads could substantially increase the economic potential of the United States. And he was proven right in many ways.

The railroads not only linked up the far-flung corners of the United States; they also linked up its capital markets. The need to finance this project of unprecedented scale radically transformed the US financial system, changing its destiny forever.

Today, Europe is at a similar juncture.

We have emerged strongly from a series of profound economic shocks: real GDP is only 2% lower today than we expected at the end of 2019. But we are facing a new set of challenges that will require a generational effort to finance.

So, this morning I will focus on how we can achieve this, and in particular on how to make Europe's capital markets more supportive.

I will argue that a capital markets union (CMU) is an indispensable project in this context that we have so far failed to advance, for two reasons.