Commission plays give and take with SMEs

The European Commission will tomorrow (30 June) propose further initiatives to open up the venture capital market for small- and medium-sized enterprises (SMEs) in Europe. But small businesses are already complaining that the benefits could be outweighed by changes proposed by the Commission to rules on state aid.

The Commission wants to cut down on red tape and provide more liquidity in the investment market for SMEs.

"They will see much, much more money in terms of risk capital, venture capital and loan guarantees with these new proposals. We do what we can and think it's a significant improvement," said Gregor Kreuzhuber, enterprise and industry spokesperson.

A Commission's communication laments the lack of so-called business angels to provide capital for EU companies with high-growth potential. In the EU, such investments are estimated to be less than a tenth of those in the US. The dearth of seed investment is blamed on low returns on capital and excessive bureaucracy.

The Commission urges member states to adopt good practices, such as fostering competition in financial markets. The idea of a pan-European growth stock market that would enable companies to widen their capital base on competitive terms is also mooted, alongside existing Commission initiatives such as JEREMIE (Joint European Resources for Micro to Medium Enterprises), which aims to improve access to microcredit with the assistance of the European Investment Fund (EIF).

But a proposal from the Commission's competition department to revise the de minimis regulation on state aid, which was published at the beginning of June, would adversely affect SMEs, argue critics. Under the revised terms of the regulation, the amount of aid which can be given without needing permission from the Commission would be doubled to 200,000 euro per enterprise over a three-year period. But, the increased threshold will no longer include credit schemes. Moreover, the awards system, say critics, would be made more unwieldy, with complex requirements to identify concrete results in advance.

Gerhard Huemer, director of economic and fiscal policy at UEAPME, the European association of craft, small- and medium-sized enterprises, said: "On the one hand, the Commission says that credit schemes co-funded by the EIF are a very good instrument to help SMEs fund projects. At the same time, it proposes to exclude guarantee schemes from the de minimis rule. The de minimis procedure cannot be used any more for credit schemes."

German centre-right MEP Alexander Radwan said: "Our view is that we think a reduction for guarantees is not appropriate. The money available has doubled, but it is not an improvement, as it drastically reduces the ability to give guarantees."

Kreuzhuber acknowledged that the concerns about the new de minimis rules might be justified. He said: "Informal meetings between SME finance supporters and the Commission are taking place. It is too early to guess which methodology will finally be applied to the de minimis rule. In any case the draft proposal ...is still subject to consultation with member states."

The European Commission will tomorrow (30 June) propose further initiatives to open up the venture capital market for small- and medium-sized enterprises (SMEs) in Europe. But small businesses are already complaining that the benefits could be outweighed by changes proposed by the Commission to rules on state aid.