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European Union SME policies

European Union SME policies. Ulla Hudina. EU Finance Day for SMEs, Athens, 20th January 2009. Supporting SMEs. SMEs – backbone of EU economy: important players in all value chains; 23 million SMEs (99 % of all firms) employ 85 million people (67% of total employment)

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European Union SME policies

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  1. European Union SME policies Ulla Hudina EU Finance Day for SMEs, Athens, 20th January 2009

  2. Supporting SMEs • SMEs – backbone of EU economy:important players in all value chains; 23 million SMEs (99 % of all firms) employ 85 million people (67% of total employment) • EU policies coordinated, aligned with national efforts:subsidiarity principle • Factors influencing SME growth: fiscal, social legislation, access to finance • Not all SMEs are growth oriented

  3. Putting SMEs first • Principle:SMEs’ interest in legislation at the very early stages of policy-making • SME-test:part of impact assessments - evaluating legislative proposals’ effects on SMEs • Consultation of SME stakeholders: indispensable at the EU/national/regional level • Commission SME Envoy: acts as an interface between SMEs and EU institutions • Provisions in legislation:to avoid disproportionate burden on SMEs

  4. EU SME initiatives http///ec.europa.eu/enterprise/sme/index_el.htm sme-finance-day.eu european-sme-week.eu

  5. Small Business Act (SBA) • 10 politically-binding principles • Legislative initiatives • More flexible state aid rules • European private company statute • Reduced VAT for local services • Improved directive on payment times • Policy initiatives:Commission, MS • SBA and finance: • Mezzanine finance (EIB, developing markets) • Private placement regime (~ VC fundraising) • Facilitating cross-border venture capital • Investment readiness (good practices)

  6. 10 politically binding principles • Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded • Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance • Design rules with “Think Small First” principle • Make public administrations responsive to SMEs’ needs • Facilitate SMEs’ participation in public procurement and better use State Aid possibilities for SMEs

  7. 10 politically binding principles • Facilitate SMEs’ access to finance and develop an environment supportive to timely payments in commercial transactions • Help SMEs to benefit more from the opportunities offered by the Single Market • Promote the upgrading of skills in SMEs and all forms of innovation • Enable SMEs to turn environmental challenges into opportunities • Encourage and support SMEs to benefit from the growth of markets MS agreement – Council Conclusions (1 Dec 2008) Regular progress assessment: Lisbon strategy reporting – National reform programmes

  8. EU and SME financing • Improving SME access to finance:fostering entrepreneurship, competitiveness, innovation and growth ~ policies and programmes • Reducing market gaps:which prevent SMEs from achieving their full potential • Banks:most used source of finance for SMEs; • Equity financing: equity gap, fragmented VC markets, limited in comparison to the US, more business angels are needed • The current financial and economic crisis => important to secure SMEs’ access to finance • CIP: No direct financing~ through fin. intermediaries • FP7: Calls(for proposals, experts, services)

  9. Financial instruments for SMEs • Better funding opportunities • 370 000 SMEs benefited in 1998-2006 (90% micro- enterprises); on average, each SME that gets a guaranteed loan creates 1.2 jobs • CIP estimate: 475 000 SMEs to benefit in 2007-2013 • Better policies • Good practices have been adopted in the Member States • The single market is being used better • New focus on eco-innovation and lead markets • But: more improvements are needed

  10. Competitiveness and Innovation Framework Programme,2007-2013

  11. CIP structure ~ 3 pillars ICT Policy(ICT) € 728 million Intelligent Energy Europe(IEE) € 727 million Entrepreneurship & Innovation(EIP) € 2166 million incl.€ 1130 m for finan.instr. € 430 m for eco-innovation SMEs Ecotechnologies

  12. 1st CIP pillar: EIP Objectives: • Access to finance for the start-up and growth of SMEs as well as investment in innovation activities, including eco-innovation. • SME cooperation environment, cross-border • Innovation and eco-innovation • Entrepreneurship and innovation culture • Enterprise and innovation related reforms Main actions: • CIP financial instruments (equity and loan guarantees) • Enterprise Europe Network (business support services)

  13. CIP - How does it work? Competitiveness programme (CIP) financial instruments EU funding European Investment Fund (EIF) Venture capital investments Guarantee funds Other investors Venture capital fund Guarantor EIF selects its financial intermediaries based on competence. The criteria are public. Bank Venture capital investment in SMEs Lending to SMEs

  14. Venture Capital in Europe 3878 3273 Source: EVCA

  15. Venture Capital funding • Innovative, early-stage SMEs: potential for high returns (despite risk), information asymmetries, reluctant investors, debt finance is not enough… • Venture capital is essential • Fragmented VC marketsin the EU: 27 MS ~ 27 environments, different market development, size, maturity… • Commission is working on steps towards a more integrated VC market in the EU • Current market conditions=> increasing need of VC finance for SMEs

  16. VC - Ongoing process • Expert group report (March 2007):mutual recognition of funds and management companies from other MS • Commission Communication (Dec 2007):MS to consider mutual recognition when adopting new/revising legislation, to overcome regulatory and tax obstacles; mutually acceptable levels of supervision and transparency • Competitiveness Council (May& Dec 2008): invited MS to make progress towards the mutual recognition of national VC frameworks • Ongoing cooperation with the MS • Commission to report in 2009

  17. Enterprise Finance Index http://ec.europa.eu/enterprise/entrepreneurship/financing/enterprise_finance_index/index_en.htm

  18. Local source of information www.enterprise-europe-network.ec.europa.eu

  19. Weblinks: • European portal for SMEs (in Greek language): • ec.europa.eu/enterprise/sme/index_el.htm • Financing innovation and SMEs: • ec.europa.eu/enterprise/entrepreneurship/financing/ • ec.europa.eu/enterprise/entrepreneurship/financing/publications.htm • Enterprise Finance Index: • ec.europa.eu/enterprise/entrepreneurship/financing/enterprise_finance_index/ • Guide on CIP, FP7 and Structural funds: • ftp://ftp.cordis.europa.eu/pub/fp7/docs/practical-guide_en.pdf • European SME week: • european-sme-week.eu • EU support programmes for SMEs (in Greek language): • ec.europa.eu/enterprise/entrepreneurship/docs/financing/sp_2008_el.pdf Thank you for your attention! entr-finance-sme@ec.europa.eu

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