international standards ( figure 6 ). according to the financial accounts, in 2012 it exceeded the euro - area average and the figure for germany by 6 percentage points and was 14 points higher than in france. comparable gaps existed in the years before the crisis. the results do not change when firm - level data are used. 7 based on a sample of 600, 000 euro - area companies, in 2010 italian firms ’ leverage was higher than the others ’ in nearly every sector and size class ( figures 7 and 8 ). 8 these differences do not reflect composition effects. according to econometric analyses that take account of the main firm characteristics bearing on indebtedness, 9 italian firms ’ leverage is 11 percentage points higher than the average for the other countries. the gap is wider for smaller companies, while it is virtually nil for very large companies ( assets of more than €300 million ). financial debts in relation to the sum of shareholders ’ equity and financial debts. the financial accounts do not allow us to tell if the differences between countries reflect the composition of the productive economy by sector and firm size. in addition, they include shareholders ’ equity at market prices, which makes international comparisons depend on the performances of the stock markets. the data are from the amadeus database, which includes financial statement information for companies of 46 countries. leverage was analyzed by means of panel regressions, including a dummy for italian firms among the independent variables. the control variables included dummies for sectors, size classes and age groups, as well as financial statement variables ( profitability, technical fixed assets, liquidity and sales growth ). bis central bankers ’ speeches 4. towards a more diversified financial system a continuation of the present financial tensions would entail high risks for the italian economy. the exit from a recession is slower in the presence of a financial crisis or a credit squeeze ; in such situations, lending normally begins to revive half a year after gdp. 10 in italy, as elsewhere, lending to businesses has lagged the real economy and been influenced by the presence of restrictions on credit supply ( figure 9 ). in order to ensure the full functionality of the financial system and provide adequate resources to italian firms in view of the cyclical upturn, both short - term and structural measures are needed. the tensions in the credit market and the financial fragility of firms reflect contingent factors – the recession and the sovereign debt crisis – but are closely bound up with the weaknesses of the italian financial system : the over -

the negative effects for the entire italian economy, and for themselves, of an indiscriminate credit crunch. 4. 2 equity capital in addition to credit, italian firms require equity capital, in order to support the economic recovery and ensure more stable financial conditions. it is estimated that in order to bring the leverage of italian non - financial companies in line with the european average would require the conversion into equity of debt totaling between €150 and €220 billion. 15 such an operation would be considerable in scope but feasible over the medium term : if completed within five years it would require the transformation into equity every year of debts corresponding to 3 per cent of the total ; it would be less arduous during a period of economic growth, above all if accompanied by the reinvestment in firms of a large portion of the earnings distributed every year to shareholders in the form of dividends ( €60 billion on average in 2011 – 12, based on istat data ). the rebalancing of the sources of financing requires interventions on several fronts. first, incentives for incurring debt must be eliminated. of these, high taxation plays a nonnegligible role, both directly and indirectly. heavy taxation of firms ’ earnings increases the advantages of borrowing with respect to other forms of financing, owing to the deductibility of interest payments from annual earnings. italy ’ s high tax rates enable firms to deduct a larger proportion of financial costs from taxable income than is possible elsewhere. it is estimated that this explains much – about one fourth – of italy ’ s unfavourable leverage gap with respect to other european countries. 16 since the onset of the crisis the cdp has constituted funds on which banks can draw at a low cost in order to provide medium and long - term credit to smes. the sme credit line, set up in 2009 with an endowment of €8 billion, has been fully exhausted ; the “ new sme credit line ”, operational since 2012, has an endowment of €10 billion, most of which has not yet been disbursed to firms. this estimate is based on the data discussed in section 3, which maintains unchanged the total value of firms ’ financial liabilities ( i. e. only modifying the debt - to - capital ratio ). a. de socio and v. nigro, “ does corporate taxation affect cross - country firm leverage? ”, bank of italy, working papers no. 889 ( 2012