be shared. conversely, in the euro area, around 70 % of the financing received by households and firms is mediated by the banking sector, while only the remaining 30 % is obtained on capital markets. this is practically the opposite of the united states, and reveals how the financing of the economy depends on the banking sector in europe. as a result, capital markets in the euro area absorb 10 % of shocks, and the credit channel around 34 %. 3 / 9 yet irrespective of the different composition of the risk - diversification channels, what needs highlighting is that in the euro area the combined power of all the private risk - sharing channels is much more limited than in more stable monetary unions. given that the role of the public sector is also virtually non - existent in europe ’ s case, the outcome is that more than 56 % of the effect of shocks – as opposed to 28 % in the united states – is not shared. moreover, it is important to note that during the most acute phase of the last financial crisis, the main risk - sharing channel in the euro area − the credit channel – virtually disappeared, owing to the process of renationalisation of bank loans. this was due to the climate of mistrust about banks ’ financial health, and to the existence of negative feedback loops between public finances and banking solvency. to sum up, in the euro area our risk - sharing channels are weaker and, what is more, they tend to contract precisely when they are most needed. the limited strength of private risk - sharing channels in the euro area reflects both the underdevelopment of capital markets and a highly segmented banking system at the national level. there are practically no banks with a pan - european strategy, and there is little progress in cross - border lending, especially in the retail markets, or in other words, in lending to households and firms. today, the euro area ’ s banks continue to grant more than 90 % of credit to firms resident in the same country, with only 5 % going to firms in other euro area countries. in the case of loans to households, the bias is even greater. expanding this foreign activity is essential for the sound working of the euro area. in this respect, there is still a long way to go before we achieve a pan - european banking system and a more complete banking union. the need to complete banking union since banking union was launched in 2012, substantial institutional progress has been made towards the creation of a new

bargaining system does not take into account the large differences in individual firms ’ specific situations, so it is not the most suitable one to prevent the bout of weak demand from generating a sharp fall in employment. further, the predominance of indexation clauses in collective labour agreements is a problem that becomes particularly harmful when, as in the current circumstances, inflation has risen due to an external shock, like oil prices, at a time of cyclical weakness. it is naive to believe that automatic wage adjustment to reflect past consumer price increases provides any protection to household disposable income. on the contrary, these clauses ( which have now been done away with in most european countries ) lessen the ability of firms to compete and keep creating jobs, generate inflation ( which affects those not protected by similar provisions ) and, in short, hinder adaptation to the external shock. in general, these characteristics of the spanish labour market have meant that employment has so far been the economy ’ s main adjustment variable in periods of crisis, since it is the quantities ( i. e. the number of workers ) that change given the impossibility of adjusting prices, i. e. wages. thus it is not surprising that in the past year the unemployment rate in spain has risen by 2. 4 percentage points to 10. 4 % in 2008 q2, while in the same period the euro area unemployment rate has remained relatively steady at a little above 7 %. the fact that spain has the highest unemployment rate of the oecd countries should lead us to reform our labour market institutions and improve this lamentable ranking. many of my talks in recent months have referred to the activity of spanish financial institutions. these played an essential role in the fourteen years of expansion and, thanks to their capable management, were in a sound position at the beginning of the international financial crisis. but it cannot be denied that spanish institutions face difficult challenges : first, as noted above, although they were not agents of the crisis, they are being affected by the standstill on the international financial markets ; second, balance - sheet building by firms and households, which i mentioned earlier, will lead to a substantial moderation of borrowing by these sectors and hence to a reduction in the business of credit institutions ; finally, the phase of real - estate adjustment and, in general, of economic slowdown, is already being reflected in increased doubtful assets, although this was to be expected and is still far from reaching alarming levels. for all these