Finance has played an increasing important role in European economies, growingfrom 2.3 per cent of GDP in 1951 to 8.2 per cent in 2007. But since the subprimemortgage crisis, the role and size of finance in our societies has been hotly debated.A key question in the debate is whether recent financial developments justify theaccrued importance of finance in our economies and whether, as some propose, reg-ulation should be aimed at reducing its importance. This report proposes a measureof the unit cost of the production of financial services over the long term in someEuropean countries, as a way of assessing the efficiency gains in financial servicesproduction. The results show that finance in Europe has become more “expensive"since the 1970s, just when deregulation was intended to make it more productive.The growth in intermediation costs between 1970 and 1990 can nevertheless beexplained by macroeconomic and monetary conditions. By contrast, the increase inunit cost after 1990 in some countries coincided with the development of modernfinance that gives a greater role to market activity