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A Single European Financial Market: Market Led or Government Driven?

Ivo Maes

The process of European financial integration has largely been driven by three different, but interacting, factors: (1) a global, world-wide process of financial integration, very much market driven; (2) policy initiatives towards European (financial) integration at the level of the European Union as a whole (with the Rome Treaty, the single market project and the Financial Services Action Plan as the three highlights); and (3) the introduction of the euro and the single monetary policy, adopted by many, but not all, of the countries of the European Union. Financial integration is a complex process. A financial system reflects the socio-economic preferences of a country. These preferences are embodied in legal frameworks, taxation systems or regulatory requirements. Removing barriers is then a little bit like playing with a Russian doll: it is only after the removal of a barrier, that one really sees the significance of the next barrier. Moreover, there are important political economy aspects, as costs and benefits of integration are not evenly distributed. The transition costs have usually to be borne upfront and tend to be concentrated, while the benefits are more widely spread.



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