Emmanuel Macron delivered his second ‘Sorbonne’ speech, laying out his vision for Europe in a more bleak manner than before, despite periodically stating he had gone on for too long. The speech reminded the author of a previous Sorbonne speech given by Jack Lang in honor of Irish president Michael D Higgins twelve years ago. Lang’s speech focused on Irish culture, particularly the work of playwright Sean O’Casey. The author also noted Lang’s popularity as many people stopped him on the street to shake his hand or take selfies, highlighting the importance of cultural connections with voters.
Macron is credited as one of the few European leaders capable of articulating a vision for Europe, with some elements of his speech such as making Europe a world leader in spacetech and AI by 2030 being perceived as unrealistic by the author. The question of who will fund these ambitious goals remains unanswered, as Europe lacks the financial capacity of the US and China to finance such new technologies at scale. The author highlights the importance of the capital markets union (CMU), launched in 2014 to shift corporate financing from bank lending to deeper capital markets and harmonize finance regulations across the euro-zone, as a means to bolster Europe’s financial capacity.
However, the CMU initiative has stalled politically, with EU leaders hesitant to accelerate it due to concerns about imposing greater costs on local asset managers. This reluctance to prioritize financial reforms leaves Europe at a disadvantage compared to the US in fueling innovation and business operations with finance. Despite France’s reputation for regulation, French officials like Macron, Lagarde, and Le Maire are among those pushing for the CMU. The author argues that Europe will likely rely on private capital, potentially from outside Europe, to fund its technology infrastructure of the future, with potential changes in governance and increased public representation on boards as a result.
The urgent tone of Macron’s Sorbonne II speech reflects the need for Europe to address its financial shortcomings quickly. The author highlights the discrepancy between the US economy, now 70% larger than Europe’s, and the market capitalization of JPMorgan, as large as the top ten euro-zone banks. This disparity underscores Europe’s failure to harness finance for innovation effectively. The author predicts that loosening investment regulations and attracting private capital, possibly from outside Europe, will be crucial in funding Europe’s technology infrastructure. Experimenting with allowing pension funds to invest more in private equity could lead to a radical change in governance, potentially shifting away from holding government bonds to seek alternative funding sources.
In conclusion, the author emphasizes the importance of addressing Europe’s financial challenges to compete with the US and China in funding innovation. Macron’s vision for Europe’s future in technology and other sectors may require significant changes in financial policies and governance structures to attract private investment. The urgency to act swiftly and decisively is highlighted, as Europe risks falling behind in the global economy without adequate financial support for its ambitious goals. Experimenting with new funding models and strengthening the capital markets union could be crucial steps in revitalizing Europe’s financial landscape and positioning it as a leader in innovation.