Reform headway is particularly slow as regards the elimination of obstacles in the provision of professional services and in the network industries, and improving the business environment by reducing the administrative burdens that hinder new start-ups. Greater efforts should be a priority in at least two areas. First, we must improve human capital and active employment policies to promote the rapid reallocation of workers towards the growth industries. Second, public and private spending on innovation must increase to create new business opportunities. Europe cannot stand on the sidelines as new  15  See P. Hernández de Cos (2019), “A framework for the Countercyclical Capital Buffer”, opening address at the Second Financial Stability Conference, Banco de España/CEMFI. 16 The reason for this is that supply-side expansionary policies tend to be deflationary. This limits their expansionary effects in a setting such as the present one in which the capacity of monetary policy to accommodate these inflationary pressures by means of further interest rate cuts is relatively limited. See Ó Arce, S. Hurtado and C. Thomas (2016), “Policy Spillovers and Synergies in a Monetary Union”, International Journal of Central Banking, 12(3), September, pp. 219-277. In addition, structural reforms may be particularly effective in the euro area economies where the private sector remains immersed in a deleveraging process; see J. Andrés, Ó. Arce and C. Thomas (2017), “Structural Reforms in a Debt Overhang”, Journal of Monetary Economics, 88, pp. 15-34. 13/16  technologies are developed and as the United States and China battle for technological supremacy.
Whereas in the United States more than 40% of economic shocks are absorbed by the capital markets (through the crossownership of equity), in Europe this percentage is almost five times smaller. Less-developed capital markets in Europe hamper business start-ups. It is difficult for them to obtain financing in the initial stages of operating, particularly at those more innovative companies with a higher level of risk, where research and the business concept are pivotal. These intangible assets are difficult to collateralise in a bank loan: therefore, the resort to capital markets is crucial. Thus, the number of high-growth business start-ups in Europe is almost 10 times less than in the United States and four times less than in China. And nor does the fragmentation of capital markets encourage the savings in some countries to be routed towards profitable investment projects in others. The financing of European firms would also benefit from the completion of the Banking Union before a hypothetical crisis arises. 17  See P. Hernández de Cos (2019), “The need for deepening euro area integration”, speech at City Week 2019: The International Financial Services Forum, and P. Hernández de Cos (2019), “Monetary Union: the dangers of a work in progress”, Euro Yearbook 2018. pp. 45-64. 14/16  This is a far-reaching project of the utmost importance for European construction, which is why it is vital it should not be left incomplete.