##posed into national law and enforced in order to produce benefits and member states have the primary responsibility for these tasks. unlocking of business potential a third prerequisite for higher growth in the euro area is the unlocking of business potential by creating an entrepreneurial - friendly economic environment. europe needs more new and thriving firms willing to reap the benefits of opening markets and to embark on creative or innovative ventures for commercial exploitation on a larger scale. it is increasingly new and smaller firms, rather than large ones, that are the major providers of new jobs. 23 the contribution from firm dynamic processes to aggregate labour productivity growth and innovation also plays a major role, in particular in high - tech industries. all in all, an entrepreneurial - friendly economic environment would imply less red tape for small and medium - sized enterprises to help them develop at home and across borders, as well as positive action to ease access to the finance they need. as regards risk capital markets, venture capital financing is also crucial. without these funds, many new and innovative companies will simply not emerge. europe is significantly lagging behind in this field, as venture capital financing in europe remains only a fraction of what it is in the us relative to the size of their economies. according to the see “ financial integration in europe ” ( 2007 ). see p. hartmann, f. heider, e. papaioannou and m. lo duca ( 2007 ), “ the role of financial markets and innovation for productivity and growth in europe ”, ecb occasional paper forthcoming. see a. ciccone and e. papaioannou ( 2006 ), “ finance, capital and growth ”, paper presented at the ecb - cfs network conference on “ financial system modernisation and economic growth in europe ”, berlin ( http : / / www. eu - financialsystem. org / berlin2006 _ programhtm. html ). see g. favara ( 2006 ), “ an empirical reassessment of the relationship between finance and growth ”, mimeo. see the european commission ’ s green paper entitled “ entrepreneurship in europe ”, 21. 01. 2003. european innovation scoreboard 2006, the innovation gap of europe with the us is significantly explained by the superior us performance in early - stage venture capital availability. the decisive importance of having an entrepreneurial - friendly economic environment is increasingly appreciated by european governments, and several initiatives at national or eu level have started to implement actions for “

. but it does underline the importance of adding to supply, not just to demand, over the medium term, and of maximising the productivity of the factors of production that we have, if we are to have the sort of growth that genuinely brings prosperity. second, and following on the theme of potential supply, others have noted that the rate of population growth at present is the highest since the 1960s. on one hand, this may help alleviate capacity constraints, insofar as certain types of labour are concerned. on the other hand, immigrants need to house themselves and need access to various goods and services as well. that is, they add to demand as well as to supply. it follows that the demand for additional dwellings, among other things, is likely to remain strong. corresponding effects will flow on to urban infrastructure requirements and so on. so the question of whether enough is being done to make the supply side of the housing sector more responsive to these demands will remain on the agenda. adequate financial resources will of course also be needed. in that regard, the current issue is not the cost of borrowing for end buyers, which remains low, but the availability and terms of credit for developers. perceptions by lenders of the riskiness of development in some cases are probably overdone just at the moment, given the strength of the underlying fundamentals on the demand side for accommodation. that will probably not be a permanent problem though ; the more persistent difficulties look like they may be in the areas of land supply, zoning and approval. third, the likely build - up in resources sector investment over the years ahead carries significant implications for the medium - term performance and structure of the economy. even if a number of the proposed projects do not go ahead, the ratio of mining investment to gdp for australia, which is already very high, will probably go higher still over the next several years. a sizeable share of the physical input will be sourced from abroad ( through imported equipment ) but the domestic spend will still be significant. so, other things equal, the investments will be expansionary for the economy. the financial capital to fund this build - up will mostly come from abroad. that is to say, absent some offsetting changes elsewhere, australia ’ s current account deficit could be considerably larger for some years than the 4 to 5 per cent of gdp we have seen on average for the past generation, which itself was a good deal bigger than seen in the generation before that. now of course the current account