In theory, the EMU opened the way for the free movement of capital. But in practice, we see that European financing remains too one-sided – firms and households depend too much on banks, and the home bias of both investors and banks is persistent. So we are not using the numbers in our union to decrease risk. Cross-border risk sharing remains low.
One reason could have to do with cross-border public risk sharing. Here, too, I am referring to the past to learn about where to go in the future. Because I know of very few historical examples where strong cross-border private risk sharing developed without, or before, a significant degree of cross-border public risk sharing.