How likely is a credit-less recovery in the euro area? The role of a capital markets union

It is often discussed how bank-dependent for financing investment euro area firms are. It is estimated that 80% of their investment needs are financed from banks and only 20% from capital markets, while in the US the reverse is true. One of the reasons for this may be the large number of small and medium sized firms (SMEs) in Europe that are relatively small to be analysed and rated by rating companies. Hence, they remain dependent on the assessment of their local bank branch. Another reason may be the fragmentation of national capital markets where asymmetry of information, differences in regulation and savings availability issues are important.