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Europe needs a bolder plan for capital markets

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Europe needs a bolder plan for capital markets

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The author is vice-chair at Oliver Wyman

How will Europe fund the huge sums needed to invest in energy transition, digital infrastructure and defence? Despite a vast €33tn pool of savings, Europe has a plumbing problem. Its capital markets are under-developed, while its banking sector is insufficiently sized to handle the growing demands for capital expenditure. To address the investment conundrums, deeper capital markets are needed.

The requirement is enormous: the European Commission has estimated that the green transition requires an additional €620bn each year to 2030, with another €125bn needed for digital transformation. Moreover, Vladimir Putin’s invasion of Ukraine, and the prospect of a second Donald Trump presidency in the US, are escalating demands for greater military expenditure.

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Yet despite multiple bazookas from the European Central Bank, growth in lending to companies in the region since 2014 has been less than half that of the US. The gap in economic performance between the two has long nagged at Europe’s policymakers. A widening divide makes this angst acute.

“We need to mobilise private savings on an unprecedented scale, and far beyond what the banking system can provide,” former Italian prime minister and ECB president Mario Draghi argued ahead of publication of his upcoming report on enhancing Europe’s competitiveness. 

Despite some progress, there remains a vast gap in venture capital relative to GDP between Europe and the US. European companies have fewer funding options to help them invest and grow.

There is a growing chorus of calls to dust off the unfinished plans for a capital markets union, led by ECB president Christine Lagarde. Recent heavyweight reports by former Italian Prime Minister Enrico Letta and former French central bank governor Christian Noyer also argue the case.

But the idea of a single market for capital across Europe has been stalled for a decade. Bold ideas often get bogged down.

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The recent European elections are likely to make things even more difficult, so perhaps it’s time to change tactics. To clear the system-wide blockages, policy architects should team up with financial plumbers, especially from the private sector.

Revitalising securitisation is the place to start, enabling insurers and pension funds to support Europe’s growth. Securitisation allows banks to transfer assets to investors, in turn freeing up their own lending capacity. This is particularly important as banks provide the majority of credit to European small and mid-sized businesses, which account for almost two-thirds of jobs.

Rules written in response to the financial crisis harshly penalised securitisations and the European market for them has never really recovered. An unintended consequence is that banks have resorted to complex synthetic transfers of risk, which only the largest can undertake, thus holding back regional banks.

Solvency II, the rule book for insurers, makes it economically unappealing to fund a long-term infrastructure project or buy a package of small business loans too, reducing potential returns and limiting available financing.

It’s time to recalibrate securitisation rules to better reflect the true risk profile of assets, keep pace with evolving capital markets and encourage investment for European growth. Reforms to Solvency II rules are also essential, along with system-wide tweaks to the banking framework and financial market standards.

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The venture capital ecosystem must be nurtured, private credit harnessed and the cumbersome sustainability rules for funds recalibrated.

Above all, Europe needs a more flexible and diversified financial market. If capital markets union plans fail to deliver it may result in lower growth. It’s time to call in the plumbers.

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A New Worry for Republicans: Latino Catholics Offended by Trump

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A New Worry for Republicans: Latino Catholics Offended by Trump

When Stuart Sepulvida arrives at St. Francis de Sales Roman Catholic Parish in Tucson, Ariz., for Mass, which he attends most mornings, he passes a display honoring local soldiers and encouraging parishioners to pray for their safety. Hundreds of small cards record their names: Robles, Arenas, Grajeda. A portrait of Pope Leo XIV hangs across the lobby.

Mr. Sepulvida, 81, is a Vietnam veteran whose patriotism and Catholicism are deeply intertwined. He voted for President Trump three times but has never felt more betrayed by an American president than when Mr. Trump denounced Pope Leo as “weak on crime” and “terrible for foreign policy.”

“It was very disturbing to me to hear both of them clashing like they did,” Mr. Sepulvida said, standing outside the church one morning this week. Now, he is reconsidering whether he will vote Republican this year.

The Republican Party is struggling to hold onto the support from Hispanic voters who helped propel Mr. Trump back into the White House in 2024. Yet as many party leaders have acknowledged the urgent need to stop the backsliding among Latinos, the president has enraged many of even his strongest supporters by clashing with the pope.

On Easter Sunday, Pope Leo, the first U.S.-born pontiff, spoke of the need to “abandon every desire for conflict, domination and power, and implore the Lord to grant his peace to a world ravaged by wars.” Within days, Mr. Trump, who has led the United States into a war with Iran, said the pope was “catering to the radical left” and posted an AI-generated image portraying himself as a Jesus figure. Mr. Trump later deleted the image, saying he thought it depicted him as a doctor.

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“It just isn’t what a president should do,” Mr. Sepulvida said. “The pope speaks for his people. He is beyond politics.”

Mr. Trump won 55 percent of Catholic voters in the 2024 election, compared to 43 percent who voted for former Vice President Kamala Harris, according to Pew Research Center. The most sizable gains came from Hispanic Catholics. While Joseph R. Biden Jr. won their votes by a 35-point margin in 2020, the Democratic advantage shrunk to 17 points in 2024. Now, just 18 percent of Hispanic Catholics said they support most or all of President Trump’s agenda, according to a poll from Pew released earlier this year.

If the president’s quarrel with the pope sours more Latinos on the Republican Party, it could affect midterm races across the country, including in South Florida and South Texas, where Republicans have notched important victories in predominantly Hispanic districts in recent years.

In Arizona’s Sixth Congressional District, which stretches from north of Tucson to the Mexican border, voters were still grappling with the fallout this week.

The district is roughly evenly divided among Republicans, Democrats and independent voters. Nearly a third of the district is Hispanic, and there is a significant population of members of the Church of Jesus Christ of Latter-day Saints, as well as a large Catholic community with deep history in the region. It also has one of largest numbers of military veterans of all congressional districts in the country.

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“The president is looking for a lot of attention from everything,” said Maria Ramos, 60, who regularly attends weekday Mass at St. Francis. A registered independent, she usually votes for Democrats but often declines to cast a ballot if she views a candidate as too liberal. “He believes he can put God in his place. He’s meddling in countries that he’s not in control of — he wants to control the world.”

“It is not just a very serious lack of respect — it is a mortal sin,” she said, shaking her head. One word comes to her mind again and again, she said: disgust.

Like so many others in southern Arizona, Ms. Ramos has several relatives who serve in the military — a path they saw to both serve the country and as an entry into the stable middle class. Many of them, she said, voted for Mr. Trump for president.

The Tucson district is now widely seen as one of the most competitive in the country. Republican Juan Ciscomani narrowly won the district in 2022, in part by emphasizing his biography as a Mexican immigrant and a devoted father of six children. He is also an evangelical Christian, a group that has driven much of the growth among Hispanic Republican voters in recent years.

Mr. Ciscomani declined a request for an interview, but when a local radio host asked Mr. Ciscomani what he thought of Mr. Trump’s comments “as a man of faith,” the congressman declined to criticize the president but said, “You can trust that you won’t see any meme like that coming out of my account.”

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JoAnna Mendoza, the Democrat challenging Mr. Ciscomani this fall, has made her 20-year career in the U.S. Navy and Marines a key aspect of her story on the campaign trail. While she rarely speaks about her religious background and no longer considers herself a practicing Catholic, she said she briefly considered becoming a nun as a teenager. She criticized Mr. Ciscomani for not condemning the president’s remarks.

“You can’t make faith a central part of your campaign and then allow this to stand,” she said in an interview.

Across Tucson, Latino Catholics, regardless of their past voting preferences, were similarly quick to condemn the president’s remarks.

When Cecilia Taisipic, 71, heard about it, she said, she winced with shame about her vote for him in 2024.

“I thought he would make the country better, but apparently it’s the opposite,” she said as she left Mass at St. Francis earlier this week. She is so fed up with politics, she said, that she is unlikely to vote at all this year. “When it comes to my faith, I don’t like anybody to challenge it. Now I don’t want to hear anything on the news. I just want to pray.”

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Matilde Robinson Bours, 63, teaches a weekly Spanish Bible study class at St. Thomas the Apostle Parish, and like nearly all of the women in her class, she immigrated from Mexico decades ago. She has voted for Republicans in nearly every election since she became a citizen. Though she has never liked President Trump, she said, his comments about the pope enraged her more than anything else he has said or done in the past.

“This surpassed everything, every social and political norm — this is personal to all Catholics,” she said. “The arrogance and ego is disgusting. To think that he is God? The pope has every right and responsibility to talk about peace.”

Still, Ms. Robinson Bours said, nothing will stop her from supporting Republicans again this year. She has been delighted that her adult children have stopped supporting Democrats in recent elections.

“Almost everyone I know thinks the way I do,” she said.

Patricia Martinez, 86, who has attended the same Bible study as Ms. Robinson Bours for years, shook her head in disagreement. She said she cannot imagine voting for a Republican who supports Mr. Trump.

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“This is different — this shows he is out of his mind,” said Ms. Martinez. “We have to have basic respect and teach that to people in this country.”

Patrick Robles, a 24-year-old native of Tucson, spent years alienated from the Roman Catholic Church, but returned to his faith more recently. “The craziness of the world sort of caused me to seek some sort of answers,” he said. Now, he attends Mass at the St. Augustine Cathedral in downtown Tucson, a few blocks from the office where he works as an aide to Representative Adelita Grijalva, a Democrat.

Mr. Robles said he saw Mr. Trump’s battle with the pope as both a personal affront and a political opportunity.

“The president is basically trying to draw a line between Catholics and what we perceive to be patriotism,” he said. “I believe we can be both.”

Last week, he texted one of his uncles who has supported Mr. Trump in every election asking him what he thought.

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“I’m afraid we need divine intervention,” the uncle replied.

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After 2 failed votes, Mike Johnson unveils new plan to extend key U.S. spy powers

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After 2 failed votes, Mike Johnson unveils new plan to extend key U.S. spy powers

Speaker of the House Mike Johnson, R-La., takes questions at a news conference at the Capitol on Tuesday.

J. Scott Applewhite/AP


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J. Scott Applewhite/AP

Speaker Mike Johnson, R.-La., is forging ahead with his latest proposal to renew a key American spy power. His bill, revealed Thursday, is largely unchanged from a previous plan which failed in a series of overnight votes earlier this month.

The program at center of the debate, Section 702 of the Foreign Intelligence Surveillance Act (FISA), is set to expire on April 30.

FISA 702 allows U.S. intelligence agencies to intercept the electronic communications of foreign nationals located outside of the United States. Some of the nearly 350,000 foreign targets whose communications are collected under the provision are in touch with Americans, whose calls, texts and emails could end up in the trove of information available to the federal government for review.

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For almost two decades, privacy-minded lawmakers from both parties have sought to require specific court approval before federal law enforcement can conduct a targeted review of an American’s information gathered through the program. The lack of any such warrant requirement helped sink an effort last week to extend the program for 18 months, as well as a separate vote on a five-year renewal. 

Trump officials, like those in past administrations, have argued that such a warrant requirement would overburden law enforcement and endanger national security. Johnson’s latest proposal would reauthorize the program for three years, but does not include a warrant requirement. Instead, the bill calls for the FBI to submit monthly explanations for reviews of Americans’ information to an oversight official as well as criminal penalties for willful abuse, among other tweaks.

“I am willing to risk the giving up of my Rights and Privileges as a Citizen for our Great Military and Country,” the president wrote on Truth Social last week, advocating for the program to be extended without changes. “I have spoken with many in our Military who say FISA is necessary in order to protect our Troops overseas, as well as our people here at home, from the threat of Foreign Terror Attacks. It has already prevented MANY such Attacks, and it is very important that it remain in full force and effect.”

Glenn Gerstell, who served as general counsel at the National Security Agency during the Obama and first Trump administration, says Johnson’s reforms look like an attempt to find a middle ground.

“There’s not a lot of really substantive changes to the statute, but some gestures are made to people who are worried about privacy and civil liberties,” Gerstell said. “It seems like a pretty reasonable compromise that is going to be satisfactory to the national security agencies and yet at the same time represents some gesture to the privacy advocates.”

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“This is not a reform bill and it’s not a compromise,” Elizabeth Goitein, a privacy advocate and senior director of the Liberty and National Security Program at the Brennan Center for Justice at New York University, wrote on X. “It’s a straight reauthorization with eight pages of words that serve no serious purpose other than to try to convince members that it’s NOT a straight reauthorization.”

A bipartisan reform deal is still out of reach

Connecticut Rep. Jim Himes, the top Democrat on the House Intelligence committee, told NPR on Wednesday, before the release of Johnson’s new proposal, that lawmakers were working on a bipartisan solution. He said House Minority Leader Hakeem Jeffries, D-N.Y., was in touch with Johnson on the issue.

“There’s a lot of work being done here,” Himes said. “We’re sort of working out a process that will be inclusive rather than exclusive.” Himes said he was negotiating with Rep. Jamie Raskin, a Maryland Democrat and constitutional law scholar, on a reform proposal they hoped could preserve and reform the program — reauthorizing it with bipartisan support.

But Johnson’s new bill appears to fall short of the inclusive approach Himes hoped for.

NPR obtained a memo written by Raskin to his colleagues urging them to oppose the bill, which he said “continues the disastrous policy of trusting the FBI to self-police and self-report its abuses of Section 702 and backdoor searches of Americans’ data.”

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“FBI agents can still collect, search, and review Americans’ communications without any review from a judge,” Raskin wrote.

FBI agents must receive annual training on FISA and are generally barred from searching for information about people in the U.S. if the goal of the search is to investigate general criminal activity, rather than find foreign intelligence information, and those searches need approval from a supervisor or an attorney. 

Republican hardliners — who sunk Johnson’s last reauthorization attempt — also don’t all appear to be on board for Johnson’s latest revision. Rep. Scott Perry of Pennsylvania, a past chair of the Freedom Caucus, said “we’re not there yet” in a video he shared to X on Thursday.

“I didn’t take an oath to defend FISA, I didn’t take an oath to defend the intelligence community,” Perry said. “We can’t have them spying on American citizens and, when they do, there has to be accountability and I haven’t seen any that I’m satisfied with yet.”

The House Rules committee meets Monday morning, the first step toward advancing the renewal bill toward a vote.

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Trump Says Israel and Lebanon Agree to Extend Cease-Fire by Three Weeks

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Trump Says Israel and Lebanon Agree to Extend Cease-Fire by Three Weeks

President Trump announced a three-week extension of a cease-fire between Israel and Lebanon that had been set to expire in a few days, after hosting a meeting between Israeli and Lebanese diplomats at the White House on Thursday.

Hezbollah, the Iranian-backed militant group that has been attacking Israel from southern Lebanon, did not have representatives at the meeting and did not immediately comment on the announcement. The prime minister of Israel and the president of Lebanon also did not comment.

A successful peace agreement would hinge upon Hezbollah halting attacks, which Lebanon’s government has little power to enforce because it does not control the militia. Lebanon’s military has mostly stayed out of the fighting and is not at war with Israel.

The cease-fire, which was scheduled to end on April 26, would last until May 17 if it takes effect as Mr. Trump described it. Before the cease-fire was brokered last week, nearly 2,300 people were killed in Lebanon and 13 in Israel. Since then, the number of Israeli airstrikes and Hezbollah attacks have been dramatically reduced, though the two sides have continued exchanging fire.

The Lebanese Ambassador to the United States, Nada Hamadeh, credited Mr. Trump for extending the cease-fire, saying that “with your help and support, we can make Lebanon great again.” Mr. Trump replied, “I like that phrase, it’s a good phrase.”

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Asked about the potential of a lasting peace agreement between Israel and Lebanon, Mr. Trump said that “I think there’s a great chance. They are friends about the same things and they are enemies on the same things.”

But Lebanon and Israel have periodically been at war since Israel’s founding in 1948. Israel has invaded Lebanon for the fifth time since 1978, incursions that have destabilized the country and the delicate balance of power between Muslim, Christian and Druze communities.

In the hours before the president’s announcement on social media, Israel and Hezbollah were trading attacks in southern Lebanon, testing the existing cease-fire.

Mr. Trump said the meeting at the White House had been attended by high-ranking U.S. officials, including Vice President JD Vance, Secretary of State Marco Rubio and the U.S. ambassadors to Israel and Lebanon.

Earlier on Thursday, an Israeli strike near the southern Lebanese city of Nabatieh killed three people, according to Lebanon’s health ministry. Hezbollah claimed three separate attacks on Israeli troops who are occupying southern Lebanon, though none were wounded or killed.

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Hezbollah set off the latest round of fighting last month by attacking Israel soon after the start of the U.S.-Israeli bombing campaign in Iran. Israel responded to Hezbollah’s attacks by launching airstrikes across Lebanon and widening a ground invasion of the country’s south.

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