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Introduction
The purpose of the financial system is to chan-
nel resources into the real economy. However,
the financial and economic crisis that began in
the United States in the summer of 2007 has
highlighted the fact that the financial sector has
been way oversized in comparison with other
production and service activities, in a phenom-
enon that has been called “financialisation”.
Finance, then, has become an activity in itself,
characterised by the generating of profit through
speculating with assets, be they shares, public
debt securities, currency, derivatives, and so on.
The process is typical of mature capitalist econo-
mies, where the development has coincided - and
not by chance - with a series of public policies that
deregulated the sector (Basel II, for example) or
liberalised it on an international level (the end of
the fixed exchange rate system known as Bretton
Woods in 1971-1973, the Single European Act,
and so on). Meanwhile, since the triumph of
Thatcher and Reagan in 1979-1980, fiscal policy
has tended to reduce taxation on capital, which
has contributed to increasing wealth inequality, as
writers such as José Víctor Sevilla or Thomas
Piketty, among others, have rightly pointed out.
The fact is that the very term financial system
is rather problematic, insofar as it denotes a set of
mostly private business entities that, on the other
hand, enjoy a more or less explicit public guaran-
tee, as well as access to public loans via the cen-
tral banks. In any case, its stability is a necessary
condition for economic growth and employment.
The challenge, therefore, is to build a true
and stable European financial system that is se-
cure and which helps to overcome stagnation
and high rates of unemployment.
Brief overview of the European financial
system
In the case of the European Union, the Treaty of
Rome of 1957 already enshrined the free move-
ment of capital as one of the four freedoms of
the single market. It was necessary in order to
ensure the efficient allocation of financial re-
sources within the framework of the customs
union and the market on a European scale. And
yet it is difficult to speak of a European financial
system, since it is segmented on a national scale
and does not operate primarily with a single
currency and a single central bank.
The financial system
of the European Union
Domènec Ruiz Devesa