Friedrich Merz, the German Bundeskanzler, has revived a familiar idea: he wants a pan‑European stock exchange. He floated the plan last week in the Bundestag as a way to stop promising companies listing in New York—but it left many experts non-plussed.
Mr Merz’s idea raised many en eyebrow. “We need a kind of European stock exchange so that successful companies such as biotech firms from Germany do not have to go to the New York Stock Exchange,” MoneyWeek reported him as saying. He added that “Our companies need a sufficiently broad and deep capital market so that they can finance themselves better and, above all, faster.” Bloomberg quoted the same line from the Chancellor’s speech.
Europe’s market structure looks, at first glance, like a handicap. The FT noted that the US stock market is four times bigger by value, three times larger relative to GDP, and twice as liquid as European markets. The combined market value of the “Magnificent 7” tech stocks of over $21tn exceeds the entire market value of European stock markets. That gulf explains the urgency behind Mr Merz’s call.
A single exchange promises scale. Bigger pools of liquidity should raise valuations. They might keep homegrown champions at home. MoneyWeek argued a unified bourse would be “a lot simpler for investors” and could mean “valuations were higher.”
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Roadblocks political and technical
The idea meets scepticism. Past attempts to knit Europe’s trading venues together have floundered. Bloomberg recalled that the European Commission blocked mergers in 2012 and 2017 on competition grounds. Regulators will not surrender oversight lightly.
Institutional obstacles loom as well. Europe counts dozens of primary exchanges and multiple post‑trade infrastructures. The FT described the continent’s system as feeding into 17 different central counterparties (CCPs) and 28 central securities depositories (CSDs). By contrast the FT said the US market works with —in effect—two exchanges for listings, one CCP and one CSD.
Technical hurdles matter. Bloomberg noted that exchanges such as Warsaw’s partially state‑owned bourse and SIX Group AG’s BME in Spain sit within varied ownership and national frameworks. Merging or coordinating them would need shareholder approval, national consent and regulatory acceptance.
Fragmentation versus adaptability
Experts disagree on the diagnosis. Some say fragmentation and the rise of off‑exchange trading have hollowed out public markets. The FT pointed out that the share of trading on traditional national exchanges has fallen to less than a third in Europe and that lit continuous trading makes up only 28 per cent of trading in Europe and 22 per cent in the UK.
Others argue the problem is mainly perception. An upcoming New Financial report from Goldman Sachs, the FT reported, suggests worries about fragmentation and liquidity are overplayed. The market has adapted with cross‑border venues and order‑routing systems. The FT observed that the overall split between trading on order books and trading away from them has remained constant in Europe—56 versus 44 per cent—since 2019 and closely mirrors the US.
That leaves a deeper fault line. MoneyWeek warned that listing hurdles, heavy regulation and high compliance costs deter companies from listing anywhere in Europe. It pointed to “diversity quotas, executive‑pay rules and exhaustive sustainability supply‑chain requirements“ as cumulative burdens.
Rules and culture blunt listings
There is also a cultural angle. Europeans save; they do not invest with the same appetite as Americans. Bloomberg cited advocates who say Europe must channel “the trillions of euros that the region’s risk‑averse savers hold in staid bank accounts into higher‑yielding securities.” The EU needs huge capital to meet modern challenges. Bloomberg recalled a report by Mario Draghi that estimated the bloc requires as much as €800bn in additional annual investment.
If savers do not move into equities, a larger exchange will not conjure capital. The FT argued that more trading venues and competition have given investors choices that lower costs and information leakage, often improving outcomes. Merging venues would not, on its own, create long‑term pools of patient capital such as larger pension allocations.
We need a kind of European stock exchange so that successful companies such as biotech firms from Germany do not have to go to the New York Stock Exchange. — Friedrich Merz, Germany’s Bundeskanzler
MoneyWeek was blunt. It wrote that Europe has too few fast‑growing companies—fewer than 200 tech unicorns compared with about 700 in the US—and that a single market will not reduce taxes or lighten regulation. “It is hard to see how a single European stock market will do anything to fix any of that,” it concluded.
Capital, not plumbing, is lacking
Commercial interests have already started to pick sides. Euronext’s chief executive told Bloomberg his group stands ready to push “the next level of consolidation of markets in Europe.” He touted Euronext’s existing single liquidity pool across Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris as a model.
Deutsche Börse responded differently. Bloomberg said its chief executive urged better regulation and structural reforms rather than wholesale mergers. The German bourse highlighted that roughly 30 per cent of stock trading in Europe takes place on transparent exchanges—a figure the firm says underscores the difficulty of drawing liquidity back from dark pools.
That tug of war—between consolidation and reform—mirrors the larger debate. Would a mega‑exchange concentrate liquidity where it counts? Or would it centralise regulatory power and create a bigger target for political interference?
Consolidation meets market politics
There is little doubt that creating a single exchange would stir geopolitics. Bloomberg pointed to the return of President Donald Trump and an “America First” agenda as fresh momentum for the EU to build its Capital Markets Union. The Commission has pushed the EU Listing Act and a blueprint for savings and investment accounts to make listing simpler.
Yet sovereignty concerns run deep. National regulators jealously guard financial centers. The FT noted that the EU’s patchwork of tax regimes and the byzantine tangle of national rules complicate any integration push. Historical rejections of mergers show how sensitive competition authorities remain.
Diversity quotas, executive‑pay rules and exhaustive sustainability supply‑chain requirements are cumulative burdens (to European investment). — MoneyWeek commentary
MoneyWeek feared centralisation would “double down on the failed centralising strategy of the last 30 years.” It warned that extra powers handed to EU officials could worsen, not ease, the regulatory burden.
Reform, or just more centralisation?
A practical question remains: would a unified exchange actually change corporate behaviour? Bloomberg suggested it could slow the drift of listings to the US and pose a competitive risk to the London Stock Exchange. MoneyWeek agreed that the London market would likely have to join—or face irrelevance.
The FT, however, urged caution. It said the real shortcomings lie in the lack of deep pools of long‑term capital and the continent’s regulatory complexity. It recommended that authorities use current reviews to “recalibrate the current framework and—to think about what equity markets should look like in the longer term.”
If European leaders want faster, bigger markets, they must do more than redraw trading maps. They must coax savers toward risk, trim needless regulatory weight and nurture companies that grow quickly. A single exchange could help. It will not suffice alone.
Ambition needs deliverable plans
Mr Merz’s pitch has rekindled a debate long overdue. It forces politicians to choose between structural consolidation and deeper reforms. It also exposes a simple truth. Scale aids liquidity. But liquidity needs capital, companies and sensible rules to thrive. Europe has some of those ingredients. It lacks others.
The debate will now move from rhetoric to design. Mergers face legal and political minefields. So do attempts to coerce cross‑border harmonisation of tax and corporate rules. Policymakers must decide whether to aim for a single plumbing system or to fix the broader incentives that drive firms to foreign markets.
Whatever path they choose, the outcome will shape where Europe’s next champions list their shares. For now, Mr Merz has set the conversation in motion. The rest will test whether Europe can match ambition with action.
