in the euro area and 33 in the us. thus, we have companies that are both more indebted and more dependent on banks. is the importance of banks in our real economy an obstacle to the recovery, now that they are burdened with non - performing loans ( npls )? i would say no, for two reasons. 6 first, bank credit to the non - financial sector is expanding, though at a moderate pace. true, lending to households drives the trend, while corporate lending remains modest and varies considerably across firms of different size, but the cost of credit is on average stable at historically low levels. bank credit fell in the recession years essentially because of the lack of demand. the 25 per cent of good companies i mentioned before do not need much bank credit as they are large enough to have access to the financial markets or to use internal financial resources. the 50 per cent of problematic companies are striving to weather the storm, so their demand for long - term credit has fallen visco ( 2017 ), ‘ exchange of views with the governor of the bank of italy ignazio visco on the economic and financial situation of italy and prospects for economic governance in the european union ’, european parliament, committee on economic and monetary affairs, brussels, 11 april 2017. considerably in past years. only the 25 per cent of really troubled firms are desperately seeking survival credit, but they probably do not have a good enough credit scoring to get it. a recent bank of italy study found no evidence that the npl stock is significantly impairing the credit allocation mechanism in italy. 7 the second reason is that the npl stock, most of which originated with the terrible recession of 2009 - 2013, is finally being trimmed back by the recovery, though with the usual time lag. but how serious does the problem continue to be? at the end of last year npls in italian banks ’ balance sheets amounted to around 170 billion euros net of write - downs, around 9 per cent of total loans. the equivalent figure for the euro area was much lower, around 3 per cent. but italian banks have much fewer level2 / level3 assets, which are no less problematic than npls. i refer here to net npls, not gross, because that is the indicator of the actual risk run by the banks. the gross figure is an indicator mostly of the state of the economy, rather than of banks. in fact, italian banks'npl coverage ratios are higher than

hand in hand with a lower propensity to innovate and worse - than - average management skills and practices. the predominance of small and medium enterprises ( smes ), which was an asset in the past because of their supposed flexibility, is nowadays a liability. cfr. rossi ( 2003 ), la nuova economia : i fatti dietro il mito ( ed. ), il mulino, bologna. let me give you some figures. according to istat, the national statistical institute, in italy the private non - financial sector consists of 4. 3 million units. some 30 per cent of total value added is produced by independent workers and very small firms ( less than 10 employees ), another 30 per cent by large firms ( more than 250 employees ) and the rest ( 40 per cent ) by smes. in germany and france the number and economic importance of smes are also large, but less so than in italy. the share of firms with an established research and development activity is less than 20 per cent among the smallest companies and above 50 per cent among the largest. italy is the european country with the largest share of firms in which the whole management – not only the ceo – is in the hands of the family owning the firm. family management is less modern and embeds lower incentives for technological and organizational innovation. when an italian sme has the opportunity to grow a lot – and many of them do, even in these difficult years – often it does not. why? for many reasons. some have to do with the traditional practices and psychological traits of our entrepreneurs. others, probably the most important ones, relate to the overall economic context, such as red - tape, high taxes, and inadequate human capital. clearly, internal and external weaknesses are interconnected. it has been empirically proved, on one hand, that small firm size is associated with the excessive duration of judicial proceedings and with the combination of high taxes and low tax compliance, and on the other that the limited supply of human capital interacts perversely with the weak demand for skills by small firms in low - technology sectors. 2 cfr. visco ( 2014 ), investire in conoscenza. crescita economica e competenze per il xxi secolo, bologna, il mulino. still, italy is populated by companies, mostly of medium size, that are highly innovative and competitive on international markets. they have driven