Euro zone ministers to detail joint plan on capital markets, productivity

By Jan Strupczewski

LUXEMBOURG (Reuters) - Euro zone finance ministers will announce next month what they want to do to boost the EU's competitive position against China and the United States, including integration of the EU's fragmented capital markets that are key to financing such policy.

The statement from the finance ministers of the 20 euro countries is to build on independent reports, commissioned by the EU earlier this year, on how to develop the EU single market and the bloc's competitiveness.

The chairman of euro zone ministers, Paschal Donohoe, said after talks on Monday in Luxembourg there were still differences on how to tackle the problem, but that by November areas of agreement should outweigh the differences.

"I aim to come back to this in November with the aim of reaching agreement on a text that reflects our shared vision... on how we enhance the competitiveness of our union in the years ahead," Donohoe told a news conference.

Reports by former Italian prime minister Enrico Letta and former European Central Bank head Mario Draghi cited weaknesses in the EU's single market and the slow growth of EU productivity at a time when China and the United States are vying for leadership in new, climate-friendly technologies. One of the main challenges is to find some 800 billion euros of necessary annual investment in technological change, the Draghi report said.

It pointed to the need for a unified capital market in the EU that would direct large European savings to help innovative companies in Europe, rather than being invested in the U.S.

But discussions on a Capital Markets Union (CMU) have been dragging on for a decade and made very slow progress because of entrenched national interests, different business and financial cultures, and regulations in European countries.

A CMU would unify national rules on bankruptcies, prospectuses, taxation of capital gains, listing requirements, or different tax treatment of debt and equity, in a bid to make it easier for companies to issue stocks and bonds, and would educate European savers about investment.

Frustrated by the slow progress of a CMU, France proposed in February to allow small groups of countries to move ahead with deeper financial integration instead of trying to work out a consensus among 27 governments.

Germany and several other countries were reluctant to allow such an approach, but Spain repeated the proposal on Monday and Donohoe said it was a signal that urgent action was needed.

"My strong preference is for all countries to move forward together," he told a news conference. "But I do understand why countries feel the need to look at what is it possible to enhance their cooperation."

"It's the second time this year it has happened and that has to act as a further catalyst, a further sign of urgency for us all to find some way of moving forward together," he said.

(Reporting by Jan Strupczewski; Editing by Leslie Adler)