There is instead an underlying variable explaining why a person both sleeps with their shoes on and wakes up with a headache. We should also be aware that when plotting two variables against each other, it is very rare to expect to find a clear-cut correlation of the type we see in textbook illustrations. The reason is, of course, that the variables are not just linked to each other but are also constantly influenced by a number of other factors. For example, inflation can be affected by changes in energy prices that do not have any significant impact on unemployment. Unemployment can, in turn, be affected by reforms on the labour market, for example, which do not have any significant effect on inflation, at least not immediately. In other words, we cannot expect to see an exact relationship but often have to be content with just barely being able to detect one. On the other hand, the absence of a correlation that is visible to the eye does not mean that there isn’t one. It may still be there and be detectable only if we control for variables other than just the two we are studying. To gain a better understanding of what happens behind the scenes, therefore, we often have to delve deeper into the data, consider more variables and use more sophisticated analytical methods than “eyeball econometrics”. But studying exactly what the data looks like is always a good starting-point. So let’s now look at the figures!
So there is still much to be done on the CMU project and Brexit makes these issues even more pressing. Let me highlight a few initiatives. First, the European Commission signalled that it would make CMU a centrepiece of the forthcoming legislative agenda and has already set up a high-level forum, composed of experts from different industry sectors, which has started work on proposals for the next CMU Action Plan.2 Second, a high-level working group created by Germany, the Netherlands and France published a proposal to relaunch CMU in 2019.3 This proposal includes recommendations for generating long-term savings opportunities, developing equity markets, enhancing cross-border financial flows, and developing debt, credit and foreign exchange financing tools with a view to increasing the international role of the euro. Last but not least, there have been industry-led initiatives such as the CEPS-ECMI task force on rebranding CMU, which put forward a market finance action plan.4 These initiatives provide valuable input for the CMU agenda. Looking ahead, I see two areas where progress is particularly needed. First, capital markets remain subject to national rules and supervision. This hampers the crossborder provision of services. Further harmonisation, for instance in the area of insolvency and taxation regimes, is needed to foster integration in the euro area. Second, if the EU27 financial markets deepen, diversify and expand across borders, there would be a clear flipside: these developments would need to be accompanied by sufficient oversight and regulatory tools to avoid regulatory arbitrage or the build-up of risks in certain parts of the system.