The meagre offering of liquid and negotiable instruments by Italian firms curtails the role that the market could potentially play in financing the economy. This is a function typically performed by institutional investors and financial intermediaries such as open-end investment funds, which make their decisions on how to allocate their portfolio based on the principles of risk diversification and holding highly liquid shares.
Greater market flexibility will not only allow Greece to cope with country-specific disturbances more easily, but it will also, by reinforcing Greece’s competitiveness, ensure a tension-free macroeconomic growth process and increase the employment-content of growth.