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ECONOMISTS CALL FOR RADICAL AND IMMEDIATE REFORM OF FINANCIAL SYSTEM
• New research uncovers key policy recommendations for financial reform to exit the crisis
• MPs told “Focus must be on finance for innovation, not innovation for finance”
London, 2nd February 2012 – The financial crisis has exposed a dysfunctional financial system that threatens European and global economic stability with potentially major social consequences. That’s according to a new report released today by Finance, Innovation and Growth (FINNOV – www.finnovfp7.eu), a three-year research project funded by the European Commission.
FINNOV explored the link between the financial sector and real economy, analysing to what extent financial activities promote or impede industrial growth and innovation. The research found immediate financial reform is essential to end the crisis and drive economic growth, leading to a number of challenging policy recommendations, including:
• Venture capital is most effective when preceded by strategic investments by the state in early stage innovation;
• Successful state investments in innovation should deliver tangible returns to the public purse, not just debt;
• Blanket support for SMEs is misguided and should be better targeted to producing not more firms but better firms that create more jobs and better products;
• Share buy-backs should be subject to stronger governance control or banned outright;
• Indicators of performance, used by financial markets, should be rebalanced to reflect companies’ investments in innovation, R&D and productivity.
To read the full press release, please click here.
