The first part of this policy paper analyzes the channels through which financial integration affects growth, stabil-ity, and convergence in the EU, including capital allocation, production specialization, diversification of risk, and access to investment opportunities. The second part takes stock of persisting administrative and legal hurdles that impede full market integration. In particular, this paper distinguishes between a firm-level perspective, inves-tors, and banks in its analysis. The final part provides some specific recommendations to improve the internal market for capital in the EU.
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