LONDON, March 12 (Reuters) - European Union plans to lift flagging growth by raising more funds on markets will be tested in a "war game" next week to identify pitfalls and help keep Britain on board the EU train.
Brussels has outlined steps for a "capital markets union" (CMU) to tap stock, bond and other markets more effectively for plugging funding gaps left by retrenching banks.
Up to 40 officials from finance ministries, the European Central Bank, the Bank of England, the European Parliament, big investors and lenders will simulate how the CMU plans could work at the March 19 event and which political potholes to avoid.
The aim is to break new ground in EU policymaking.
"We wanted to try a new method which engages the participants much more in developing the arguments rather than a traditional panel discussion," said Hans Blomeier of Germany's Konrad Adenauer foundation, the event's main organiser.
The foundation placed the war game in London because it is Europe's biggest financial centre and it could benefit from the CMU and persuade the country to stay in the EU, Blomeier added.
Prime Minister David Cameron has promised a referendum on EU membership if he wins reelection in May.
"Nothing has been finalised on the CMU so we thought it was important to deliver ideas before everything is done, cooked and decided," Blomeier said.
"If you want the benefits of the EU, then you have to be a member," he added. War game results will be included in the EU's public consultation on the CMU plans.
The exercise was designed by John Ryan, a Cambridge University economics professor, and Gergely Polner, head of EU public affairs at Standard Chartered bank.
Participants will be split into teams to come up with specific solutions and then test them.
EU financial services chief Jonathan Hill wants the basics of the CMU in place by 2019 but faces scepticism that more urgency and focus is needed to drive through changes that will inevitably hit decades-old vested interests.
Polner said the war game seeks to identify such barriers and how best to get round them.
"We are trying to forecast how the CMU discussion will run and get people to answer what will be the major dividing lines, what would the British or say Polish position be, how would the main parties respond," Polner said.
There is also heavy emphasis on the users of markets like investors, who are typically less active than banks in lobbying the EU on what they want. (Reporting by Huw Jones; Editing by Tom Heneghan)