the improvement in tax administration will lead to a fairer distribution of the fiscal burden and will facilitate the reduction of the excessively high tax rates. according to the global competitiveness index 2017 – 2018, greece ranks last and second to last as regards the adequacy of the tax system to provide incentives to invest ( 137th out 137 countries ) and to work ( 136th out of 137 countries ). v. support small and medium enterprises ( smes ) smes1 are the backbone of the greek economy in terms of employment and gross value added ( gva ). in 2015, they accounted for 75. 1 % of total gva and for 87. 3 % of employment in non - financial corporations. very small or micro smes ( employing less than 10 people ) accounted for 59. 1 % of total employment and for 35. 9 % of gva in the non - financial corporate sector. the larger share of smes in total employment relative to their share in gva suggests that there is a problem of low productivity, which is more pronounced for very small smes. given the prevalence of smes in the greek economy, policy efforts should also be targeted towards providing incentives for cluster development, alongside with measures to provide affordable funding via the banking sector, the capital markets and the official sector through various eu initiatives. these concerted efforts will allow smes to adopt new technologies and benefit from economies of scale as they will gain access to international distribution channels and to foreign markets. vi. remove various barriers to investment besides improving the business environment and lowering taxation, it is necessary to remove decisively and definitively the obstacles arising from various small or large organized interests and groups, which exacerbate the business climate and hamper the materialization of new investment and the implementation of privatizations, even those already approved. the removal of capital controls as a result of the gradual improvement of the economy and the return of full confidence will improve the investment climate and help attract foreign direct investment. vii. promote innovation and a more effective use of human capital innovation - driven growth, supported by knowledge - based capital ( or intangible assets ), is critical to improving living standards. the efforts of previous years, mainly through the use of resources from the european structural funds, have led to a partial improvement in the country ’ s performance in many areas, with the 5 / 9 bis central bankers'speeches expenditure in research and development ( r & d ) being on an upward trend over the period

developments. the above considerations indicate areas where further assistance may be required by particular countries. apart from programs supported by international organisations, continuing recourse to bilateral co - operation arrangements between authorities of eu countries and those of see countries would be particularly useful. in this respect, the experience of the authorities of eu countries that have relatively recently completed the reform of their financial sector in accordance with international standards would be a valuable input to the authorities of see countries that currently face similar challenges. also, peer group reviews by financial sector supervisors from other countries could play a useful role in periodically assessing the effectiveness of financial sector regulation and supervision in each see country and in offering advice on needed improvements. finally, national banking federations of see countries can help to bring the operation of local banks up to eu standards through multilateral co - operation in the areas of staff training and convergence in the implementation of sound operating and risk management systems. to this end, the national banking federations participating in the interbalkan banking forum have recently signed a memorandum of understanding. it is important to recognize that, as the financial systems of see countries are liberalized and their economies become more open, the task of maintaining financial stability becomes more challenging. in meeting this challenge, i believe that arrangements for supervisory co - operation and the provision of technical assistance can continue to play a useful role in supporting national efforts for further regulatory and supervisory reform aimed at strengthening the resilience of the financial sector of see countries and achieving conformity with eu standards. let me conclude by stressing the importance of the financial system for economic growth. why is the financial system so crucial? the answer is that the financial system can be thought of as a coordinating mechanism that allocates capital to building factories, houses and roads. if capital is misallocated, the economy will operate inefficiently and economic growth will be low ( mishkin, 2005 ) 1. effectively, just as a high level of human capital increases the productivity of labour, so an efficient financial system increases the productivity of all factor inputs. for this reason, a financial system can be thought of as the central nervous system of an economy. if it is stable and efficient, it coordinates the economy ’ s activities, helping to improve the living standards of its citizens thank you for your attention. mishkin, s. frederick ( 2005 ), “ is financial globalization beneficial? ” nber working paper no. 11891 ( december ).