ECB vice-president urges deeper EU integration to strengthen resilience

European Central Bank vice-president Boris Vujčić has called for deeper integration of the EU’s single market, arguing that stronger cross-border trade and finance would help the bloc withstand geopolitical and economic shocks without retreating from global openness.

In a speech at the Central Bank of Ireland’s Financial System Conference in Dublin on 2 November, Vujčić said fragmentation within Europe was limiting its ability to share risks and support investment. He pointed to divergent national rules and procedures, which ECB estimates put at the equivalent of tariffs of about 67% on goods and 95% on services — figures he described as an upper-bound estimate.

Vujčić said Europe’s exposure to external shocks was visible in energy markets. The EU imports 57% of its energy, he said, and almost all of its oil and gas. Diversifying supplies after Russia’s invasion of Ukraine was an important achievement, he added, but did not prevent a further energy shock when tensions escalated in the Middle East earlier this year.

The effects of shocks also vary between member states. Vujčić cited the 2022 energy crisis, when electricity prices for firms rose further and remained high for longer in Italy than in Spain, partly because Spain generates more of its power from renewables.

He argued that a more integrated energy market, financial system and payments infrastructure could help countries absorb such pressures. In financial markets, cross-border investment can spread losses and gains; Vujčić said ECB research found that markets and fiscal transfers absorb about 30% of economic output shocks in the euro area, compared with about 70% at US state level. Capital markets account for only 5% to 10% of that risk-sharing in the euro area, according to the research he cited.

The speech also highlighted the gap between European and US investment. Vujčić said US venture-capital funds invest about six times as much as EU-based funds, and warned that foreign finance can make it more likely that successful European start-ups move their headquarters or intellectual property abroad, or list outside the EU.

His proposals included reducing barriers in the single market, completing a European deposit-insurance scheme, harmonising some tax and insolvency rules, and developing European digital payment systems. He said cutting internal barriers to goods and services by 2% could, in the long run, offset the projected effect of higher US tariffs on euro-area GDP between 2025 and 2027 — estimated at about 0.7 percentage points.

The ECB vice-president’s argument builds on his earlier appeal for investment to protect nature and economic resilience, but this speech focused on market integration and the financial system. Vujčić said openness, integration and resilience were mutually reinforcing, and that Europe’s capacity to absorb shocks depended in part on choices it could make itself.