Call for EU to boost hi-tech spending

Date: 11/03/1999

By Tim Jones and Renée Cordes

THE French government is proposing the most ambitious EU programme to subsidise high-technology innovations since European Commission President Jacques Santer's failed bid to boost spending three years ago.

Under Finance Minister Dominique Strauss-Kahn's plan, EU leaders would draw up a priority list of cutting-edge projects which could then benefit from Union funds.

This approach would be along the same lines as that taken to financing the Union's 14 showcase Trans-European Networks (TENs) - a policy which has seen more than €50 billion channelled into key cross-border transport schemes over the past five years.

Strauss-Kahn is calling for the creation of a new "European committee, made up of industrialists and scientists, and not government representatives", which would identify a series of top-priority projects in time for the list to be approved at the EU summit in Cologne on 3-4 June.

He believes the EU should identify leading projects and then decide how to finance them. This is the opposite of the approach taken by former Italian Prime Minister Romano Prodi when he said last year that profits made by the European Central Bank should be diverted into research and development.

In 1996, Santer's plan to increase TENs and research spending by €1 billion was shot down by an alliance of the German, British, Dutch, French, Finnish and Swedish governments. Since then, 11 out of 15 of the EU's governments have fallen into the hands of Socialists and Social Democrats, and Strauss-Kahn believes the ground is now more fertile for his interventionist ideas.

He argues that the European Investment Bank (EIB), which already has a mandate to channel €1 billion into hi-tech small and medium enterprises, should expand its activities in this area. "The effectiveness of this instrument has proved itself in 1998," he said. "Now it should grow significantly."

The minister even dared to suggest that a "European loan" could be issued to raise funds for innovation subsidies; a proposal first mooted by French Prime Minister Lionel Jospin last year to fund high-speed rail links.

The EIB has already invested €600 million indirectly in hi-tech companies as part of the mandate it received at the June 1997 summit in Amsterdam, forwarding the money to venture-capital funds which take a chance on start-up companies.

The approach was a daring one for the EIB, which provides loans with government guarantees, but officials say they expect to see positive results - even if they are a long way off. "Obviously it is a riskier area, but we are fully confident that we will get a return on this investment," said EIB spokesman Adam McDonaugh.

Strauss-Kahn's move has been welcomed by industry, which fears that Europe's smaller companies may not have a fighting chance to compete with larger multinational counterparts even if they are on the cutting edge of research.

"It is certainly good news," said Guy Martens, chairman of the research and technological development working group at the Union of European Industrial and Employers' Confederations (UNICE). "What is absolutely needed is to fill the gap between obtaining interesting research results and bringing them to the market."

But Martens cautions that while funding for SMEs is needed, they should not be given special treatment. "You should not put SMEs in some kind of ghetto," he said.

Industry Commissioner Martin Bangemann's officials also applauded the French initiative. "It would be helpful to put together new devices for venture capital for innovative companies," said his spokesman Jochen Kubosch. "Any suggestion like this is welcome.