2011. the gap between these two ratios is a sign of the relatively high level of productivity in this sector. international monetary fund 2011 article iv consultation – staff report, may 2011. bis central bankers ’ speeches as a matter of fact, as shown in chart 11, productivity – as measured by the value added per employee in the sector – has risen considerably in recent years and in 2011 stood at nearly eur 65, 000, significantly more than the corresponding per capita value added in the services sector in general, which stands at around eur 34, 000. bank credit remains the main source of external funding for non - financial businesses in malta. moreover, as in most other european countries, bank financing is regarded as the main, if not the only, avenue of external financing for smes. external funding is however primarily suitable for large corporates, given the costs and regulatory requirements associated with debt issuance. a more active and innovative debt market is in the interest of the country ’ s economic growth potential. undoubtedly this needs to be harnessed through an appropriate macro - prudential policy safeguard of financial stability. additional sources of financing that deserve further exploration are through the european investment bank, and in particular through the european investment fund. the latter offers a venture capital facility whereby it helps venture capital and private equity fund managers to provide risk capital to smes. companies can also benefit from the jeremie programme ( joint european resources for micro to medium enterprises ), which promotes increased access to finance for the development of micro, small and medium - sized enterprises in the eu. over 80 % of the balance sheet value of the core domestic banks is funded through customer deposits, considerably higher than the 30 % average in the euro area. 2 indeed, customer loans extended by core domestic banks continue to be fully funded from customer deposits. meanwhile, maltese banks ’ recourse to eurosystem funding has been modest, as shown in chart 12, which measures eurosystem funding as a proportion of the balance sheet. this in itself is a good sign, reflecting the absence of banking distress. banks must also exercise caution in the use of such sources. although conditions are currently very favourable, it must be clear that such terms will not last forever. banks are thus encouraged to continue using such facilities but not become overly dependent on them. business models which are based on a disproportionate use of eurosystem funds are not banking models that the central bank feels comfortable with. however, the word “

policymaking capacity of developing countries will be tested more severely. more specifically, there will be important decisions to take regarding social security schemes, particularly traditional pension systems in which today ’ s workers pay for the benefits of today ’ s retirees. this will no doubt involve making difficult choices, some of which may have painful consequences in the short run, but which are essential for sustained economic development. the economic consequences of population ageing this is the case because population ageing is expected to have wide - ranging and long - lasting economic effects, involving not just government revenue and expenditure but also national saving and investment ratios as well as the labour market. the main issue that comes to mind when mentioning population ageing is its impact on government finances. most countries, including malta, presently operate pay - as - you - go pension systems. the ageing phenomenon undermines the financial viability of pay - as - you go systems by reducing the number of contributors relative to beneficiaries. ageing also entails increased government expenditure on health, and especially on the care of the elderly. the challenge to public finances is even greater if, as is the case in malta, the budget is already in deficit. changes in the age distribution of the population are also likely to affect a country ’ s private consumption and saving patterns. the ‘ life - cycle hypothesis ’ suggests that individuals tend to even out consumption outlays over their lifetime, such that a person saves during the working years in order to finance consumption during retirement. a rising trend in the proportion of elderly people, therefore, tends to be accompanied by a decline in the national saving ratio. oecd projections, in fact, point to a reduction in saving rates of between 5 and 12 percentage points of gnp over the period 1980 to 2025. such a contraction could lead to a vicious circle, as the resulting higher interest rates reduce investment, adversely affecting economic growth and, in turn, the ability to finance social security commitments. ageing could also have a negative impact on financial markets. pension funds are at present major players in most stock markets. as the baby boom generation retires during the current decade, most of these funds will have to gradually liquidate their assets, probably leading to downward pressures on share prices. this would in turn create a negative wealth effect, as declining asset prices dent the purchasing power of households and give rise to a reassessment of consumption patterns. the simultaneous decline in fertility rates, meanwhile, is expected to