capital market sources of finance from a medium - term perspective, it will be important to develop capital market sources of finance in order to progressively make euro area firms less reliant on bank credit. this would also contribute to a rebalancing of firms ’ financial structure after the fast increase in their leverage during most of the past decade in several euro countries. the italian presidency ’ s agenda emphasizes the development of capital market sources of finance and of non - bank financial intermediaries ( venture capital funds, debt funds, european long - term investment funds – eltifs ). in the face of the several valid proposals that have already been put forward, notably by the commission, this agenda thus offers a good starting point towards selecting a well - defined set of priorities and moving to the implementation phase. a first important lever is to provide non - financial firms with incentives for more equity financing, which allows them to better undertake medium and long term investments, including those in research and development ( best financed by risk capital ), while decreasing their financial vulnerability. taxation may play a key role in providing these incentives. for example, the use of an allowance for corporate equity ( ace ), which allows corporations to deduct a notional return to new shareholders ’ equity, reduces the tax advantage of debt funding while generally implying, due to its incremental nature, only a limited loss in tax revenues ( an ace was introduced in italy in 2011 and reinforced in 2013 and 2014. ) increasing non - bank sources of finance for the economy, and specifically for smes, also requires the development of financial intermediaries such as equity and debt funds, closedend funds that invest in loans, bonds and shares issued by unlisted companies. this semester could see the final approval of the regulation on european long - term investment funds, a major step to stimulate their activity across europe. investing in infrastructures along with country - specific structural reforms on the supply side, broader economic policy action is required to accelerate the building - up of infrastructure, both tangible and intangible, indispensable to the success of a true single market. the financing of infrastructures and the proposal for an eu plan of public investment require a more efficient use of public resources along with greater involvement of private funds. to this end, euro project bonds, public - private partnerships, infrastructural funds and public guarantees could be the instruments to lever on private investments. strengthening the role of european union ’ s financing institutions

and for growth and investors a wider array of options. the issues of establishing credit ratings and standardizing corporate information are especially important. the availability of private placement in italy would be extremely useful, particularly for small and medium - sized firms, which have very limited access to the bond market at present. its development in italy too will be furthered by standardizing the rules and practices at european level. * * * the lengthy, and still unresolved, greek crisis has cast new light on the limits still encumbering the governance of the economic and monetary union despite the efforts of recent years. the stability of the union cannot be undermined by one country ’ s difficulties. if a member state finds itself in a financially untenable position, then there must be the means to arrive at a rapid and orderly solution. in strengthening european integration, not only in the economic sphere, effective methods of handling emergencies must be identified and adopted. ultimately, in order to absorb cyclical and structural shocks the euro area must have a common budget, based on autonomous taxation capabilities and direct recourse to financial markets. the resilience of member states ’ economies can be improved by introducing institutions that facilitate labour mobility bis central bankers ’ speeches and by making more rapid progress towards unifying the capital markets. the ability of national budgets to counter adverse cyclical phases must also be safeguarded. individual countries must continue their efforts to enhance the soundness and the growth potential of their economies. italy has taken several important steps that are now beginning to bear fruit. had we not done so, the greek crisis would have had serious repercussions. but our task is not complete ; reform must continue in all sectors of the economy and in the public administration. our financial system must become more competitive and regain its capacity to fully support economic activity. the measures bearing on the quality of credit and the governance of banks constitute a major advance in this direction. bis central bankers ’ speeches