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) 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

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

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

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)

10 politically binding principles 1.Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded 2.Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance 3.Design rules with “Think Small First” principle 4.Make public administrations responsive to SMEs’ needs 5.Facilitate SMEs’ participation in public procurement and better use State Aid possibilities for SMEs

6.Facilitate SMEs’ access to finance and develop an environment supportive to timely payments in commercial transactions 7.Help SMEs to benefit more from the opportunities offered by the Single Market 8.Promote the upgrading of skills in SMEs and all forms of innovation 9.Enable SMEs to turn environmental challenges into opportunities 10.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 10 politically binding principles

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)

Financial instruments for SMEs Better funding opportunities  SMEs benefited in (90% micro- enterprises); on average, each SME that gets a guaranteed loan creates 1.2 jobs  CIP estimate: SMEs to benefit in 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

Competitiveness and Innovation Framework Programme,

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

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)

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

Venture Capital in Europe Source: EVCA

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 markets in 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

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

Enterprise Finance Index

Local source of information

Thank you for your attention! 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 Weblinks: