Bonn seeks deal on late payments

Date: 22/04/1999

By Renée Cordes

EUROPEAN companies which delay paying their suppliers' bills for months would be forced to pay interest on the money owed under a new German proposal set to be unveiled next week.

Bonn is calling for firms which drag their feet to pay interest set at six percentage points above the European Central Bank's repurchase rate, which currently stands at 2.5%.

The latest proposal, which is due to be discussed by EU industry ministers at a meeting in Luxembourg next Thursday (29 April), is aimed at overcoming opposition from member states which argue that the European Commission's original proposal for the interest to be set at eight percentage points above the ECB reference rate is too high.

" Small and medium-sized enterprises (SMEs) should be able to benefit and take full advantage of the internal market," said one diplomat. "It creates great potential for them to grow and employ more people."

The Commission has called for uniform debt-recovery procedures throughout the Union, particularly to help SMEs which rely on prompt payment.

France, Italy and the UK, which argued that the Commission's proposed interest rate payment was unworkable, are also unhappy with the German compromise, insisting that an even lower rate should be set.

They are also opposing moves by the presidency, supported by Austria, Denmark, Finland, Greece, the Netherlands and Sweden, to include a provision giving creditors the right to claim "reasonable compensation" for debt-collection fees.

" We would have liked eight percentage points, the figure used in the British legislation," said Gary Parker, a spokesman for UEAPME, which represents small and medium-sized businesses across the EU. "But whether it is six or eight, we prefer firms to borrow from a bank instead of paying creditors late."