for specific bank product segments. 6 especially in those segments, for which market - based financing is an alternative ( for instance for long - term loans to non - financial corporations ), an increase in the speed of pass - through seems to have occurred in the euro area during recent years. overall, the monetary transmission mechanism benefits from integrated and well - developed financial systems in the sense that it leads to a more similar and, in part, faster pass - through of market rates to bank rates. efforts to strengthen bank competition and enhancing the availability of alternative capital market - based instruments as well as access to financing should therefore be expected to improve the monetary transmission mechanism. at the same time, one has to acknowledge that several studies 7 on the productivity of the eu ( euro area ) from an industry point of view come to the conclusion that the differences in productivity growth between the us and the eu ( euro area ) may be partly due to differences in the financial sector. while the productivity performance of the financial intermediation and insurance and pension funds sub - sectors was comparable between the eu and the us, according to some studies the main difference was in the sub - sector “ activities auxiliary to financial intermediation ”. 8 while productivity measurement is particularly difficult in the services sector, and, hence, also in the financial sector, such differences in productivity growth may be partly related to a higher development and integration of the us financial system, which may facilitate the exploitation of economies of scale. at the same time, with respect to the current situation, it is still too early to assess the longer - term effects of the current turbulences on the gap in productivity growth between the two economic regions. in this context, there is evidence of a considerably positive effect of financial development on eu economic growth. assuming that the eu would reach the same level of financial development ( defined as the sum of domestic credit and stock market capitalisation to gdp ) as the us, it is estimated that the overall effect on annual eu value added growth would be between 0. 5 and 1. 0 percent. 9 evidence on euro area financial integration let me now turn to financial integration, which is one important dimension of the efficiency of a financial system. let me begin by recalling that the ecb and the eurosystem have a keen interest in the progress towards financial integration in europe as it is of key importance for the conduct of the single monetary policy, as it enhances the smooth and effective transmission of monetary policy throughout the euro area. in this

the workforce play a key role in boosting labour productivity. • increasing the flexibility of labour market, which would ensure that wages are aligned with productivity developments and reflect competitiveness at the sectoral and firm level as well as the regional employment situation. • other measures devoted to human capital accumulation, through improving higher education systems and supporting training and life - long learning, and a higher share and more efficient expenditure in research and development, enhance productivity growth in the long - run and also increase non - price competitiveness. • in addition, further efforts are also needed to improve the access to financing, especially as regards small and medium - sized enterprises ( smes ) and the access of start - up firms to venture capital financing. as most recently highlighted in empirical work 2, small successful european firms are apparently less able to grow than comparable us firms due to the poorer access to financing. over the past decade, progress in these areas has been uneven across euro area countries. some significant efforts have been made and countries see the benefits from these reforms coming in. however, the reform process needs to continue and the past years of good economic performance are no reason for complacency or even a reversal of past reforms. there is still a long way to go if we want to attain the objective of the lisbon strategy to make the european union “ the most competitive and dynamic knowledge - based economy in the world ”. see, among others, philippon and veron ( 2008 ) and aghion, fally and scarpetta ( 2007 ). let me now turn to the competitiveness of the euro area financial sector. financial efficiency has made large progress since the introduction of the euro and has contributed to the competitiveness of the euro area, by accelerating the speed of capital reallocation. generally, in an efficient financial system, information is accessible and widely distributed. an efficient financial system usually enhances economic growth, whereas, by contrast, information asymmetries or insufficiently developed markets may lead to financing constraints, often especially for smes. therefore, a well - functioning financial system is an eu policy priority as it allows the economy to fully exploit its growth potential, fosters the accumulation of capital and the diversification of risk. evidence on euro area financial development let me start with the size of capital markets, on the basis of which financial development can be assessed, which is an important feature also for the competitiveness of the financial system. the size of euro area capital markets has increased markedly since