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Günter Verheugen

Vice-President of the European Commission responsible for Enterprise and Industry

Small business act for Europe

Commission hearing
Brussels 6th February 2008

Dear Ladies and Gentlemen,

I welcome the European SME-Community here in Brussels and first of all I wish to thank you very much for the strong support that I have got from you since the launch of a new SME policy exactly three years ago.

If I compare the situation of today with the situation that existed at the beginning of 2005, I can proudly say that together we have made a huge difference. When I told the European Parliament in February 2005 that SME policy would be a top priority for the Barroso-Commission, people were somewhat sceptical. There has never been a shortage of nice words for SMEs in Europe but there was always a remarkable lack of real action.

What surprised me most was the fact that policy makers and leading economists at a national and European level did not seem to have fully recognised the decisive role of SMEs for the competitiveness of Europe in a globalized economy. There are three reasons for this:

  • European manufacturers will continue to invest and produce outside Europe. We will see further losses of jobs in these sectors and the only way to compensate this is to exploit the potential of SMEs for growth and jobs.
  • The present financial turmoil and its significant impact on the economy as a whole have shown clearly that a strong SME structure makes an economy less vulnerable in a crisis like this. SMEs normally do not invest in highly complex financial products and they normally stay where they are.
  • SMEs are close to the customers and therefore more flexible. As they are very often family owned they have a high awareness of the needs of the society and generally demonstrate a high level corporate social responsibility. What big companies must develop, implement and monitor is for SMEs part of their traditional culture. In other words: SMEs are the most important factor of stability in an economic environment which is characterized by rapid and permanent structural change.

To summarise in a nutshell:

Europe can in the long run only benefit from globalisation and we can in the long run only maintain our European way of life including our high living standards, if we fully recognize and improve the role of SMEs. Policy makers everywhere in Europe should never forget that for the strong majority of Europeans an SME is the employer.

We know very well where the strengths and the weaknesses of European SMEs are. We have clearly identified, together with you, the areas where action is needed. Let me mention just a few: societal recognition of entrepreneurship, access to finance, transfer of business, ICT uptake and skills, reluctance to do cross-border business, limited innovative capacities, limited R and D-expenditure and , last but not least, difficulties in coping with administrative burdens or, to be more precise, over-regulation.

We have addressed these problems with a lot of initiatives and actions. And as I have already said: we made a difference. SME policy is now firmly anchored in the European strategy for growth and jobs.

To fully unlock the business potential for SMEs is now a strategic objective of the EU and all its member states. We see progress everywhere, certainly at different speed and with mixed results but the process has started. What I have seen as my most important personal task was the change in mind-set: to convince policy-makers that SME policy has an extremely positive cost-benefit-ratio. To convince economists and media that SME policy is a big issue even if the individual SME on its own may not be so large. And I have tried to convince the SMEs themselves that they must be more active and defend their interests in a much stronger way.

I wanted to make these points very clear because we have to avoid a misunderstanding: the project that we will discuss this afternoon, the Small Business Act, is not the beginning of a new policy, it is a final step. In my view it is the project that will crown our actions. We must not invent the wheel this afternoon, it is already invented. With the SBA, we can exploit a very favourable political environment and go the famous extra mile. We have chosen the word 'act' which is not common in the EU legal language in order to demonstrate the unique character of this initiative. It will be a combination of legislative actions, political commitments and concrete practical steps. If we are lucky we can fill the remaining gaps and solve the remaining problems for SMEs in one sweep. This is ambitious, but we owe this high level of ambition to al of you here today. Let me now explain in more details where we are and in which direction we should go.

The fact that there are so many of you here shows that we share a belief in the importance of this initiative: A Small Business Act for Europe.

In 2005, the Commission renewed its commitment to the Lisbon objectives of growth and jobs including through the launch of a coherent, inclusive and proactive Modern SME policy. Its mid-term review last October showed that substantial progress has been made both at EU and national level. I think it is no exaggeration to say that in a bit more than two years Europe’s 23 million SMEs have become the centre of interest not only at the EU level but also in most Member States. It is a political breakthrough that the “Think Small First” principle is now being integrated into Community and national policies.

The Commission has made real efforts to cut red tape for SMEs and has significantly increased the SME focus within major EU spending programmes for the period 2007-2013. Member States have also substantially improved the SMEs’ environment and progressed in their implementation of the 2006 Spring European Council conclusions.

In most Member States the many arms of government now extend a single hand to business through one- stop- shops. The time needed to start a business has been shortened, the cost lowered and bureaucratic procedures reduced. The average cost for setting up a new company in the former EU-15 has fallen from 813 euros in 2002 to 554 euros in 2007 and the time needed to register a company was reduced from 24 days in 2002 to about 12 days today. Is that enough? Are we there yet? “Not quite”!

DESPITE these significant improvements, I am convinced that more needs and can be done. We have to build on this momentum and use this position of strength to tackle the remaining long-term challenges for SMEs. That is why more emphasis has been put on SMEs in the context of the next Lisbon cycle 2008/2010. As a part of this commitment, we decided to propose a new far-reaching initiative: a sort of Small Business Act for Europe.

Our action is threefold: First, we are looking at ALL remaining unnecessary obstacles faced by SMEs, analysing the solutions offered by the market and by public authorities in those areas. Second, we are looking at ALL opportunities that we have to help SMEs to overcome their problems and to grow. And last but not least, we are asking ourselves the very question: Have we, the EU, and its Member States gone far enough in our action?

The result will necessarily be a combination of new, ambitious and resolute actions and of common principles to guide action at EU and Member States level to release the full potential of SMEs to create jobs and grow.

Let me be clear, SME policy remains largely the preserve of national authorities – and rightly so – under the principle of subsidiarity. That is why we also need a strong commitment on their side.

Ladies and Gentlemen,

Last week we launched a broad public consultation. Our online questionnaire contains questions on key policy areas as we see them:

Regulating better for the benefit of SMEs.

We need your ideas, we need your experience, and we need your know-how. Now is your chance to have a direct say on how we can regulate better for the benefit of SMEs. Do you feel that SMEs are bombarded by regulations from all directions and at different times of the year? We are therefore proposing common commencement dates, date or dates when all regulatory changes take effect at the same time of a year. This is only one of many measures that we are currently reflecting on.

It's our common task to make sure that regulations do what they're designed to do and clearly our "better regulation" strategy has already achieved a lot. By taking part in the process and contributing ideas, from now until end of March, you can give us further invaluable feedback that isn't available from any other source.

Putting SMEs and entrepreneurship at the forefront of society.

A recent Eurobarometer survey asked our citizens how they perceived entrepreneurship: If they were keen to set up their own company. The numbers are self-explanatory!

49% of EU citizens have never thought of setting up a company – almost double the US figure. These surveys and statistics give us valuable knowledge. It is up to us now to use this knowledge and translate it into new concrete measures, measures to encourage more Europeans to become entrepreneurs.

We already have a promising tool in the pipeline: Erasmus for young Entrepreneurs, where young entrepreneurs and potential young entrepreneurs complete a traineeship in an SME in another country. This initiative ensures that experience is exchanged and reinforced at European level. Do we need more cross border mobility programs? Where do we have to go further?

Facilitating SMEs’ access to markets and in particular to the Single Market.

Let me give you three examples of how we are already translating this political vision of into concrete measures:

1. We are preparing a European private company statute which will allow SMEs to benefit from a simplified common European legal form suited to their needs. This will not only reduce costs for cross-border operations, but also increase legal certainty.

2. SMEs are facing difficulties when participating in and benefiting from European standardisation. How can we change that? We have many ideas in mind. One could be to reduce the costs of certain standards for SMEs.

3. We want to give SMEs better access to public procurement: We have analysed how public procurement markets, which account for about 16% of EU GDP, could be better used to promote the growth and competitiveness of SMEs. The results of a recent study show that 43% of the value of public procurement contracts above the thresholds fixed by the EU Directives goes to SMEs. But we can do more. For instance, the procedures and practices used in many tenders still disadvantage SMEs over larger competitors. I remind you that we are not asking for quotas or quantitative obligations. Instead, we will propose initiatives to cater for the need for more transparency and information on public tenders.

Finally, in a global world, some SMEs may also want to tap opportunities outside the Single Market and they need to be helped. What encourages me is that we have these tools to help SMEs enter foreign markets – export support programmes, Executive Training programmes, only to name two of them. Do we have to extend them?

Supporting SMEs’ access to finance and innovation.

Access to finance for SMEs is only one key to fostering a more competitive Europe. Giving SMEs more consideration in the State Aid field is another one.

We are reflecting on possible measures to target State Aid better to the needs of SMEs. But one thing must be clear as well: Member States have to make much better use of the existing opportunities of the State Aid System.

SMEs’ innovative and creative capacity is not always fully exploited. Many SMEs are not aware of the intellectual property system or the protection it can provide for their inventions, brands, and designs. Insufficient information on the relevance of intellectual property in day-to-day business, high costs associated with obtaining and enforcing intellectual property rights, perceptions that the intellectual property system is esoteric, too cumbersome and time-consuming: These are among the reasons why many SMEs are sometimes slow to protect their intellectual property.

Let me just give you one example of how the Commission is already tackling this problem: In September 2006 we published a ten-point action plan designed to foster innovation in Europe, in particular for SMEs. Do we need to go further?

Let’s turn now to the environmental challenge into opportunities for SMEs.

I feel that too many SME managers still leave energy efficiency at home, instead of putting it to work FOR them. If you’re  an  SME,  you’re  less  likely  to  have resources to  dedicate  to  energy  efficiency planning  –  but  it  can  be  done  and we want  to help you. We have to use environmental challenges as a platform to drive innovation, in particular SMEs

In less than 24 hours we will celebrate the launch conference of our new European business support network, the largest and most extensive business and innovation support network in Europe, which became effective on the 1st of January. One idea could be to place environment and energy efficiency experts within this new network. These experts could provide a type of "help for self-help" education, how to comply with environmental legislation AND reap the benefits.

Let me now come to the last point: Enhancing the implementation of EU SME policy principles.

The European Charter for small enterprises, the Modern SME policy and various Council conclusions established a number of principles. Take the “think small first" principle as an example. These principles constitute the basis for SME policies both at European and national level which are now fully anchored in the Lisbon Strategy for Growth and Jobs. How can we better ensure the implementation of these principles at national level?

These are only examples of areas where we need your views. I am well aware that they are not exhaustive. I have not really talked about skills, to name but one. But please remind us.

The Commission aims to adopt the proposal of the European Small Business Act in June this year. I am very pleased that the current and the forthcoming Presidency, Slovenia and France, have included this initiative in their agenda, so we can count on swift negotiations in the Council, naturally in close co-operation with the European Parliament.

However committed and motivated we - in the Commission - are to work in all the above areas, we need YOUR co-operation. I am confident that by working together, we can achieve our vision of having a vibrant SME sector, thriving with globally competitive enterprises. Let us create, together, the best possible Small Business Act for Europe for the benefit of all Europeans.

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