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The European Central Bank’s recently released stress test results aim to clean up the eurozone’s banks before the launch of Europe’s vaunted banking union. But Jean-Claude Juncker, the newly inaugurated European Commission president, has set a different financial priority for his first five-year term, one that has received decidedly less attention: the creation of a European capital markets union.
It is not yet clear what this project means or how it would benefit the EU. To a large extent, Juncker’s capital markets union is still a slogan in search of a policy program. But it is easy to imagine a set of initiatives designed to help Europe develop healthy nonbank sources of finance and to let capital flow freely across the continent’s national boundaries. If so, it could be hugely beneficial for Europe.
BREAKING THE BANK MONOPOLY
Europe needs nonbank finance because its banks—which