europe as a whole is still pursuing consolidation to achieve a reduction of debt ratios. in this context, the challenge is to counter the structural impediments driving potential growth down, above all the negative demographic trends, in a situation in which the scope and effectiveness of conventional macroeconomic policies is reduced. i will contend that it is of paramount importance to carry out those structural reforms that may increase the participation rate of the labour force and lead to a more efficient use of the factors of production. reforms aimed at increasing investment and employment in the most productive sectors are particularly needed at the current juncture. the preliminary findings of the eurosystem ’ s compnet network, which has collected competitiveness indicators across a huge sample of about 700, 000 firms from 11 eu countries, show a strong heterogeneity of firm labour productivity within and across countries. the distribution of firms ’ productivity, or cost structure, is not only very dispersed but also very asymmetric : there are few champions and a high proportion of low - performance firms. for policy - makers, this has two major implications. first, when talking about the competitiveness or productivity of a country, we must look much deeper than simple average indicators, such as unit labour costs or market shares. the same policy intervention may produce different results, depending on the initial distribution of firms ’ productivity, even if average productivity is the same. second, the dispersion and skewness of firms ’ distribution have important implications for aggregate productivity growth. a recent strand of literature has shown that aggregate productivity in a country may be lagging behind partly because inputs are not allocated efficiently across firms or industries. this suggests that there is significant scope to increase productivity through targeted policies, such as product market reforms, that facilitate the reallocation of resources across sectors and firms. for instance, the work of the compnet network shows that better regulated industries are able to channel resources more efficiently to the most productive firms. moreover, it can be shown that the contribution of the reallocation of resources to productivity growth has been reduced during the crisis period in some countries, such as italy and spain. this evidence may be viewed as an indicator of structural rigidities which have become binding in the great recession. 20 see compnet task force, 2014, “ micro - based evidence of eu competitiveness : the compnet database ”, ecb working paper no 1634, february. bis central bankers ’ speeches labour market reforms have also been advocated by

start taking on excessive risk, and this behaviour can expose the economy to large macroeconomic contractions. 6 in other words, while we know that we need a well - functioning financial sector, we have to pay attention to its evolution. at reasonable levels, finance is essential for growth, but once it grows to an excess, the damage it can do can easily wipe out its positive contribution. this is why we should resist the efforts of the industry to push back on regulatory reform with the argument that more finance is always good for growth and jobs. fortunately, we will have now a leverage ratio that will be an important instrument to control possible excesses of the king, r., and r. levine, 1993, “ finance and growth : schumpeter might be right ”, quarterly journal of economics 108, 717 – 7137 ; rajan, r. and l. zingales, 1998, “ financial dependence and growth ”, american economic review 88, 559 – 586 ; fisman, r., and i. love, 2007, “ financial dependence and growth revisited ”, journal of the european economic association 5, 470 – 479. love, i, 2003, “ financial development and financing constraints : evidence from the structural investment model ”, review of financial studies 16, 765 – 791 ; brown, j., fazzari, s., and m. petersen, 2009, “ financing innovation and growth : cash flow, external equity, and the 1990s r & d boom ”, journal of finance 64, 151 – 185. rioja, f., and n. valev, 2004, “ does one size fit all? a re - examination of the finance and growth relationship ”, journal of development economics 74, 429 – 447 ; manganelli, s., and a. popov, 2013, “ financial dependence, global growth opportunities, and growth revisited ”, economics letters 120, 123 – 125. cecchetti, s. and e. kharroubi, 2012, “ reassessing the impact of finance on growth ”, bis working paper no 38. tobin, j., 1984, “ on the efficiency of the financial system ”, lloyds bank review 153, 1 – 15 ; philippon, t., 2010, “ financiers vs. engineers : should the financial sector be taxed or subsidized ”, american economic journal : macroeconomics 2,