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European Financial Market and Financial Market in Croatia (a Comparative Approach)

Europe is moving quickly to become an integrated marketplace without internal frontiers, with free movement of goods, persons, services and capital. According to the stages of the European Monetary Union that includes the removal of al1 obstacles to financial integration, all monetary and financial instruments should circulate freely, and banking, securities and insurance services should be offered uniformly throughout the Community. Furthermore according to the Maastricht Treaty all the individual currencies will be replaced with a single currency called "Euro" and a lot of other steps will be adopted that would lead to a full European Monetary Union (EMU). The EMU will be implemented by a process called convergence, bid until then few financial market differences should exist. Given the important role of secondary capital markets for the development of financial markets and especially the European capital market this paper examines first the evolution of the EMU and the efforts to integrate the European capital markets. A comparative analysis of the secondary capital markets in Great Britain and Germany is done to find out if significant differences exist in the volume or the structure of these markets which are the largest capital markets in Europe. Since Eastern European countries like Croatia are interested to become members of the EMU in the future the development of the financial system in Croatia is examined by analyzing the legislation and institutional solutions as well as the organization, volume and structure of the secondary capital market. For small countries like Croatia trying to become a full member of the EMU it won't be only extremely difficult to meet the four convergence criteria but in case of capital markets the question will always arise whether it is possible to reach sufficiently high market capitalization, trading volume and liquidity in order to perform its basic function as an efficient way for allocating resources in an economy.

Financial market; European Union; Accession

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