European Central Bank Vice President Boris Vujicic said on Monday that the eurozone countries are integrating economically with the United States at a faster pace than they are integrating with each other, warning that this trend makes the bloc more vulnerable to economic shocks, at a time when geopolitical tensions are escalating.
These statements highlight a fundamental paradox in the European Union's years-long endeavors to create a true single market for capital. European savings are increasingly moving to the United States, while national borders still hinder the flow of investments between the bloc's countries, according to Reuters.
Based on European Central Bank research, Vujicic said that estimated barriers to cross-border equity investment between the euro zone and the United States have fallen by about a quarter since 2014, more than twice the pace of decline in barriers between euro zone countries themselves.
He added, during a speech he delivered at a financial conference in Dublin: “It is striking that we are integrating with the United States at a faster pace than we are integrating among ourselves.”
Vujicic also pointed to evidence that the fragmentation of European capital markets reduces the economy's ability to withstand shocks. European Central Bank research shows that companies whose shareholders are mainly concentrated in the local market reduced their investments during the shock of the “Covid-19” pandemic by about 20 percent more than similar companies whose shareholder base includes international investors.
European companies also tend to reduce their investments when oil prices rise, unlike their American counterparts, according to Vujicic.
He said: “In a fragmented Europe, investments become the first tool for adapting to any shock. “This is a resilience problem before it is a growth problem.”
In a related context, Vujicic identified the most prominent risks threatening financial stability at the present time, most notably the rise in stock valuations for artificial intelligence companies, pressures in the bond market, and potential losses at shadow banking institutions, in reference to risks that may arise outside the scope of the traditional banking sector.
The European Central Bank is scheduled to publish its semi-annual financial stability review on November 18.
Germany confirmed, on Monday, that gas supplies will be sufficient to meet its needs during the winter, despite not achieving the target set for storage levels, at a time when the war in the Middle East is pushing global energy prices to rise.
Since the loss of Russian gas supplies, following the outbreak of war in Ukraine, Europe's largest economy has been seeking to diversify its sources of energy, amid mounting fears as the coldest winter months approach, according to Agence France-Presse.
The situation has become more difficult this year, with a sharp rise in the cost of refilling storage facilities, after the American war on Iran pushed European gas prices to their highest levels in years.
According to the European platform AGSI, which specializes in tracking energy data, the filling rate of German gas storage facilities reached 61 percent, on average, on Monday, which is less than the target level of 70 percent, by November 1, set by law.
The percentage was also below the European Union average, which was close to 75 percent.
However, the German Ministry of Economy confirmed, in a statement to the agency, that “gas supplies in Germany are secure for the coming winter, even at current storage levels.”
A spokeswoman for the ministry said that the country has succeeded in diversifying its sources of supplies since the energy shock that followed the comprehensive Russian invasion of Ukraine in 2022, noting that the increase in liquefied natural gas imports particularly contributed to alleviating concerns about supplies.
She added that Germany has strengthened its capabilities to import gas, including by establishing new terminals to receive liquefied natural gas.
The country receives most of its imports of this material from the United States, while part of it also comes from the Middle East.
The spokeswoman explained that “the 70 percent storage level should, for these reasons, be interpreted flexibly, taking into account the general supply situation.”
On the other hand, the German Energy Storage Initiative (ENES), which represents the gas storage sector in Germany, considered that failure to reach the target on time constitutes “a clear indication of the necessity of developing approved tools to ensure preparation for the winter.”
In a statement, the association called for enacting more stringent laws to ensure that target storage levels are achieved.
Indications indicate that the German government is increasingly concerned about the supply situation. Last September, the Ministry of Economy ordered a state-owned energy company to increase its gas reserves, citing “ongoing geopolitical risks.”
