The labour pains of Europe are made worse, and permanent, by the risk-weighted capital requirements for banks.

Sir, I refer to Sarah Gordon´s, Claire Jones´ and Peter Wise´s report on the eurozone unemployment “Labor pains” July 7.

I just wish those three would take perhaps an hour or so to sit down and discuss among themselves which of the following two Europe they would prefer, if worried about the future job perspectives of their children or grandchildren.

One, like today´s, where regulators thinking this will bring stability to the banking sector allow banks to hold less capital against what is perceived as safe than against what is ex ante perceived as risky, or one, where banks must maintain the same capital (a leverage ratio), against any asset?

In today´s Europe banks therefore earn much higher risk adjusted returns on equity when lending to the infallible sovereigns, the housing sector or a member of the AAAristocracy, than when lending to “risky” medium and small businesses, entrepreneurs and start-ups. In the hypothetical Europe, in fact the Europe that used to be some decades ago, there is no such discrimination or distortion, though of course banks would as always consider the perceived credit risks in order to set interest rates, size of exposures and their other terms.

And I argue that banks in today´s Europe, as a consequence cannot finance “the risky”, those which represents so much of Europe´s potential future, but are forced to dedicate themselves mostly, or even exclusively, to re-finance the safer past… and that simply means that a new generation of jobs will never have a chance to see the light.

Please, when deciding, do not forget that most safety and prosperity of today is the result of the risk-taking of yesterday. God make us daring! Are you really going to exploit the past for your own benefit and refuse your children their future?

And I also hold that the current bank capital risk-weight distortions are, at the end of the day, absolutely useless even from the perspective of bringing stability to the banks. Because the only thing it guarantees, is that the absolutely safe will get too much credit in too lenient terms and therefore, sooner or later, ex-post, turn into absolutely risky.

And history is 100% on my side. Never ever has there been a major bank crisis caused by excessive bank exposures to what was ex-ante perceived as “risky”, these have always been caused, no exceptions by excessive exposures to what was perceived as absolutely safe but that ex-post turn out not to be.

PS. I believe FT and its journalists should be weary of the fact that there is not a chance in hell that the European Commission will order Google to eliminate the links to all the letters I have sent to all of you on the subject of the distortions caused by risk-weighted capital requirements for banks, and so you will have to live with the fact that for whatever reasons, these might indeed be very petty, you have decided to ignore my arguments.