Small and medium-sized enterprises (SMEs), “represent the backbone of the European economy, provide most jobs and are the most creative. They therefore contribute considerably to the EU's success”, declared Special Committee Chairman Wolf Klinz (ALDE, DE), opening the workshop on the impact of the crisis on SMEs.

“SMEs are important not only for innovation but also as engines for growth and employment”, agreed Pontus Braunerhjelm, Managing Director of Swedish Entrepreneurship Forum and Professor of International Business and Entrepreneurship at the Royal Institute of Technology in Stockholm.

Taking stock

In Portugal, the “business fabric is made up mainly of SMEs, particularly micro ones”, said António Saraiva, President of the Confederation of Portuguese Industry (CIP), citing European Commission data that Portugal's per capita ratio of SMEs is more than twice the EU27 Member States' average.

SMEs face “particularly difficult access to credit and can’t obtain the traditional sorts of bank loan”, pointed out Mr Saraiva, noting that “guarantees required by banks are pretty burdensome and government measures don’t lead to desired results.” They must also deal with particularly complex legislation, slow courts, payment delays sometimes exceeding 1,000 days, and labour market constraints, besides having to pay VAT even before they are able to collect it, he added.

In France, “93% of all businesses have fewer than 10 employees”, said Maria Nowak of the European Microfinance Network and the Association pour le droit à l'initiative économique (ADIE) in Paris. In 2009, the French economy lost 500,000 jobs but on the other hand, 570,000 to 600,000 new enterprises were created - 72% up on 2008. Entrepreneurship was further boosted by a new law on self-employment (in 2009, there were 300,000 people registered as self-employed), she added. Ms Nowak concluded that French SMEs had been “seriously affected” by falling demand, changing client behaviour and greater difficulty in accessing financial services, but said “80 % of them remain optimistic.”

In Sweden, where employment had fallen in the 30 largest companies but grown in small firms and services, “knowledge-intensive sectors are expanding to the detriment of labour intensive sectors”, said Pontus Braunerhjelm, adding that there is often “too much red tape” and that  reform of the “legal system is one of the cornerstones for SMEs to have a chance to succeed.”

In the EU as a whole, “we are missing young and innovative companies”, which play a growth-enhancing role,  partly due to the “protectionism, protection of inefficient firms and labour market regulations”, said Reinhilde Veugelers, Professor of Managerial Economics, Strategy and Innovation at the Catholic University of Leuven.

It is “too early to exit the recovery programmes”, but firms “already need to know what will follow”, said Gerhard Huemer, Economic and Fiscal Policy Director of the SME association UEAPME. “We were shocked” that the Commission's proposal for the EU2020 (post-Lisbon) strategy “does not once mention good quality legislation”, he added.

SMEs were “hit twice” by the crisis: first in terms of credit access and then by falling demand for their goods and services, said  Yiorgos Ioannidis, Visiting Fellow in the Department of Political and International Studies of Cambridge University (UK), citing an OECD study. Mr Ioannidis highlighted an “absence of statistics” necessary to compare developments across Europe.

Need for bold measures

Diogo Feio (EPP, PT), and Burkhard Balz (EPP, DE), quizzed speakers about the role of state and public authorities in supporting small firms and ensuring that the EU Small Business Act is applied. Reinhilde Veugelers replied that “unfortunately, we have still incomplete knowledge about what works and what doesn't.” But all speakers agreed that “all assistance is welcome”, because “everything we can do to promote creativity will promote our growth and development.”

Now is a “good time for all co-operative initiatives” among SMEs, inter alia to “pool the resources for R&D and training”, said Ms Nowak in a reply to Sergio Gaetano Cofferati (S&D, IT). “Partnership between companies is the only way out”, agreed Mr Saraiva.

Stressing the “absolute” importance of continuous training, Mr Huemer advocated “joint programmes for whole sectors”, rather than separate training for each company.

In Europe, greater freedom to “hire and fire”, which Mr  Braunerhjelm listed as a worthwhile labour market measure, is “almost the F-word (...) it is an American model,” said Olle Schmidt (ALDE, SE). “We don't need to copy the US system”, but  we do need a “system that enables restructuring”, replied Mr Braunerhjelm.

Kay Swinburne (ECR, UK) and Special committee rapporteur Pervenche Berès (S&D, FR), were both interested in financial support to SMEs and asked respectively about “instruments to be set up to help these companies as regards credit” and their “access to public procurement.”

SMEs “maybe suffered less from relocation of industries” but they are the bedrock of our economy and so it is essential to “guarantee their access to public procurement” and “develop on a large scale” other sources of financing e.g. equity, venture capital or micro-credits, said Ms Nowak. Ms Veugelers also stressed the need to “develop venture capital” at EU level.

Some SMEs see freedom to supply services across borders “as a kind of threat”, said Mr Huemer, in a reply to a question by Othmar Karas (EPP, AT), about the impact of the EU services directive. Mr Huemer noted that the directive had to be implemented by the end of 2009, and suggested waiting 3 years before evaluating the situation.

Next Steps

The experts' input will feed further discussion among MEPs and the final report by Special Committee rapporteur Pervenche Berès. The draft should be unveiled on 29 April, to allow time for amendments before the final report is adopted in Committee on 13 July. The CRIS report than will be put to a vote by Parliament as a whole at the September II Plenary session.