##ing new technologies and developing skills at the upper end of the value chain ; unless, in other words, the conditions that favour high private investment are re - established. moreover, it is worth remembering that reforms that raise potential growth produce permanently higher income not just for the economy as a whole, but also for governments, through higher tax revenues and more sustainable public debt, which opens up fiscal space. and that, in turn, means there is more scope for fiscal policy to support monetary policy in stabilising the economy. second, in the area of structural reforms, special attention should be paid to measures that bring about a reduction in the debt overhang. certainly, a lot has already been achieved in the banking sector with the creation of the single supervisory mechanism, and as part of that, the comprehensive assessment and the ensuing significant recapitalisation of the banking sector. this has also supported the repair of the banking lending channel and the monetary policy transmission mechanism. but it is clear that, in some countries, the large stock of non - performing loans ( npls ) is still preventing a stronger pick - up in lending. high stocks of npls can dampen credit supply for several reasons : they absorb resources and operational capacity ; they tie up bank capital in unproductive uses ; and they reduce bank profitability, which weighs on banks ’ capacity to generate capital internally. such effects on lending tend to be exacerbated for smaller firms, which are more dependent on bank lending. moreover, slow resolution of npls hampers the necessary process of corporate restructuring during which viable firms reduce their debt and start investing again, and non - viable firms exit from the market. creating the conditions for a rapid workout of npls has to be part of the economic policy actions to restore conditions that favour productive investment. each country has its own list of actions needed to speed up this process, and delays on this front are a serious drag on growth. in particular, well - designed insolvency regimes are key in separating viable from non - viable borrowers and in facilitating the valuation of assets to be sold off. an efficient judicial system is also essential. analysis by ecb staff shows that the pace of deleveraging is faster in countries that have a strong and effective legal apparatus. from this perspective, the recent reform of insolvency law in italy is welcome. it is estimated that the average length of bankruptcy procedures will be halved. foreclosure times are also expected to decrease

significantly. this is important because a shorter time to recover collateral brings the market value of non - performing assets closer to a level at which transactions can take place, meaning bank deleveraging can accelerate. the ongoing work towards a capital markets union ( cmu ) is an opportunity to accelerate progress on all fronts. a true cmu should aim to harmonise insolvency regimes and improve bis central bankers ’ speeches their overall quality by converging towards international best practices. that should in turn also help expand secondary markets for distressed debt, helping banks get npls off their books more easily. and if cmu is successful in developing european markets for sme assetbacked securities, banks will be able to diversify credit risks from lending to smes more easily, strengthening credit supply. finally, if we are to truly underpin confidence, it is important that, even while dealing with more pressing priorities, we do not lose sight of the need to complete our monetary union. in that context several steps taken by the commission are steering the process in the right direction. but what is also important for confidence is that those steps form part of a longerterm vision that removes fragility from our union. in sum, the combination of our monetary policy measures on the demand side, coupled with structural reforms on the supply side, goes a long way towards creating the conditions for a genuinely structural recovery. monetary policy and structural reforms together support demand, deleveraging and confidence, all of which are key for increasing investment. but when it comes to actually implementing the reform agenda, in many countries of the euro area hesitation seems to prevail over determination. certainly, we need to bear in mind that the necessary changes are on such a scale as to be unachievable without major consensus. but we also need to bear in mind that delays in making important structural reforms, which make a country more prosperous and more able to face today ’ s challenges, may sometimes have political reasons, but never economic ones. bis central bankers ’ speeches