Paolo Angelini: Innovation and innovation financing in Europe

Welcome address by Mr Paolo Angelini, Deputy Governor of the Bank of Italy, at the conference on "Financing growth and innovation in Europe: economic and policy challenges", jointly organised by the Bank of Italy and the Florence School of Banking and Finance, Fiesole, 10 March 2025. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

1. Introduction

Good morning, and welcome to today's Conference on "Financing Growth and Innovation in Europe: Economic and Policy Challenges" jointly organised by the Florence School of Banking and Finance (FBF) of the European University Institute and Banca d'Italia.

In my talk I will outline some key aspects of innovation and innovation financing in the European bank-dominated financial landscape. I will then briefly discuss a few selected initiatives within the EU's recently announced Competitiveness Compass, which aims to strengthen Europe's competitive position.

2. Some facts about innovation and the financial system in Europe

Europe is struggling to keep pace with the most dynamic countries, the United States above all, mainly because of low productivity growth. Innovation is one of the key drivers of productivity. Recalling some facts can help frame the issue.

Fact #1: The EU is characterized by a relatively weak innovation performance – a feature that I shall refer to as the "EU innovation gap", borrowing terminology from the Commission Competitiveness Compass. To be sure, this is a blunt summary of a nuanced reality. Historically, Europe has had a good track record at generating new ideas. For instance, it produces almost one-fifth of the top 10 percent most cited STEM publications, as much as the US. Likewise, about one third of patent applications to the European Patent Office (EPO) comes from EU residents. However, these shares have been declining over the last decade. Ground was lost relative to China and, for patents, also relative to the US (Figure 1.a, b).