COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 10.07.1996 
COM(96) 329 final 
COMMUNICATION FROM THE COMMISSION 
INTEGRATED PROGRAMME 
FOR 
SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs) 
AND THE CRAFT SECTOR 
THE MULTIANNUAL PROGRAMME, CONCERTED ACTIONS 
AND OTHER COMMUNITY ACTIONS IN SUPPORT OF SMEs 

TABLE OF CONTENTS 
A GLOBAL FRAMEWORK FOR COMMUNITY ACTIONS IN FAVOUR OF 
SMES 
I. The strategic context: the contribution of SMEs to employment 
II. Pulling together: a coherent framework for SME Policy 
III. The relationship with the 1994 Integrated Programme 
IV. The particular role of the Third Multiannual Programme for SMEs 
V. Content of the Integrated Programme for SMEs 
PRIORITY MEASURES 
I. Simplify and improve the administrative and regulatory business environment 
II. Improve the financial and fiscal environment for enterprises 
III. Help SMEs to Européanise and internationalise their strategies, in particular 
through better information and cooperation services 
IV. Enhance SME competitiveness and improve their access to research, 
innovation, information technologies and training 
V. Promote entrepreneurship and support special target groups 
CONCLUSION 
/U 
A GLOBAL FRAMEWORK FOR COMMUNITY ACTIONS 
IN FA VOUR OF SMES 
There is now widespread recognition that small and medium-sized enterprises (SMEs)1 
can make a vital contribution to job creation, competitiveness and growth within the 
European Union. 
Member States and the Community already try to unlock the potential of SMEs through 
an array of measures, but many of these initiatives are narrowly targeted and too 
disparate to be easily accessible by most SMEs. Maintaining coherence between these 
initiatives and, in a rapidly changing economic environment, ensuring that the different 
actions are directly relevant to SMEs and their problems remains a political priority for 
the Commission. 
The 1994 Integrated Programme2 was a first attempt to set out a global framework for 
all Community actions in favour of SMEs under the various Community policies. It was 
based on the White Paper on Growth, Competitiveness and Employment and introduced 
a closer coordination and partnership between all parties involved in SME development. 
In its SME Policy Paper presented to the 1995 Madrid European CounciP, the 
Commission developed a more ambitious policy in favour of SMEs, highlighting that 
targeted help to SMEs is a cost-effective way to support job creation. The conclusions 
of that Council endorsed this approach, inviting the Commission to put the objectives of 
the Policy Paper into practice as swiftly as possible.4 
These new priorities and initiatives must now be set in the context of the existing action 
programmes in favour of SMEs so that the different contributions can be focused on the 
full range of strategic objectives. 
This Communication thus updates and develops the 1994 Integrated Programme 
specifically to encompass the n&v Community priorities for SME Policy. It is a direct 
follow-up to the Commission's European Confidence Pact for Employment^ In line 
with the Florence European Council6 it calls for an integrated approach whereby 
national, regional and local authorities, the social partners and the Community 
institutions each take practical action in favour of growth and employment. 
1 Commission Recommendation concerning the definition of SMEs, OJ n° L 107, 30.4.1996, p.4. 
2 Integrated Programme in favour of SMEs and the Craft Sector, COM(94) 207 final of 3.6.1994. 
3 Commission Communication of 29.11.1995 on "Small and Medium Sized Enterprises - A dynamic 
source of employment, growth and competitiveness in the European Union", Document 
CSE(95)2087 (hereafter referred to as "the Madrid SME Policy Paper"). 
4 Conclusions of the Madrid European Council, SI(95) 1000 of 16.12.1995, p. 14. 
5 CSE(96) lof5.6.1996. 
6 Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.2. 
Coordinating Community contributions in favour of SMEs and monitoring progress is 
the essence of the Community's Enterprise Policy.7 The Integrated Programme 
demonstrates its coordinating role with regard to Member States' actions affecting SMEs 
and the various contributions of Community policies and programmes. Progress on the 
implementation of this integrated approach is set out in a regularly published 
coordination report.8 
I. THE STRATEGIC CONTEXT: SMEs' CONTRIBUTION TO EMPLOYMENT 
In its Madrid SME Policy Paper the Commission stated that, although SME policy now 
ranks higher than ever on the political agenda, much more could be achieved by a fresh 
approach focusing on a number of priority issues. It confirmed that SMEs, in particular 
those at the smaller end, now play a key role in terms of growth and of generating new 
jobs. 
SMEs as job creators 
SMEs account for 99.8% of all companies, 66% of total employment and 65% 
of business turnover in the European Union. 
Net job creation in SMEs has more than compensated for job losses in large 
enterprises during the period 1988 to 1995. During that period enterprises with 
fewer than 100 employees have been responsible for almost all job creation. 
The Madrid SME Policy Paper stresses that European SMEs' full potential for growth and 
employment creation has not been properly realised and that growth and job creation in 
SMEs has been inhibited by basic market and policy imperfections and failings which 
have not yet been adequately addressed. These imperfections were analysed and the 
following remedial measures proposed: 
Priority Recommendations from Madrid SME Policy Paper 
Reduce red tape which hampers European Entrepreneurship 
Ensure better involvement of SME Organisations in the decision-making 
process 
Help finance SMEs which create new jobs 
Reduce market distortions and inefficiencies 
Vigorous action to promote research, innovation and training to assist SMEs 
Enhance competitiveness and internationalisation of SMEs 
See also Article 5, paragraph 2, of the Proposal for a Council Decision on a Third Multiannual 
Programme for SMEs, OJ n° C 156, 31.5.1996, p.5. 
Report on the coordination of activities in favour of SMEs, COM(96) 362 final of 8.9.1995 (Article 
5, second indent, of Council Decision 93/379/EEC of 14 June 1993, OJ N° L 161 of 2.7.1993, p.71). 
Ill 
II. PULLING TOGETHER: A COHERENT FRAMEWORK FOR SME 
POLICY 
In its Resolution of 22 April 1996 on the coordination of Community activities in favour 
of SMEs and the craft sector,9 the Council highlighted the need to ensure that the stated 
priorities in favour of SMEs be reflected in real actions in their favour. For achieving these 
objectives the Council called for the strengthening of coordination of all Community 
instruments and programmes and for better coordinating, as appropriate, of Member 
States' actions in favour of SMEs. 
In line with this Council Resolution and the provisions of Article 130 of the Treaty, the 
Integrated Programme provides an appropriate framework for an increased coordination 
of policy measures for SMEs. More specifically, the Integrated Programme places in an 
overall framework the full range of Community measures in favour of SMEs, thereby 
helping to achieve greater consistency, effectiveness and transparency of the individual 
actions. 
The Integrated Programme is not a substitute for various actions taken at the national or 
Community level, neither does it involve any change in decision making processes. Its 
objective is to ensure a closer partnership between all parties concerned with the 
development of SMEs - at Community, national and regional levels - with a view to 
enhancing the convergence and effectiveness of measures. The Integrated Programme 
distinguishes between three types of measures: 
Integrated Programme for SMEs 
Concerted actions with Member States10 Contributions from the European Union^ 
1. measures to promote mutual 2. measures for SMEs developed under 
consultation between Member States and other relevant Community policies (e.g. 
joint co-ordination, as appropriate, Structural Funds, R&TD, EIB and EIF); 
concerning actions in favour of SMEs. 3 measures ^ SMEs deve,oped within 
the framework of the Community's 
specific SME Policy (i.e. the 
Multiannual SME Programme). 
The present Communication covers the three elements of the Integrated Programme. It 
supplies a frame of reference for the first two elements of the Community SME policy, i.e. 
concerted actions between Member States and the Community's contributions for the 
development of SMEs through its other policies and programmes, and sets out their 
relationship with the third element, i.e. the complementary and specific SME Community 
9 Council Resolution of 22 April 1996 on the coordination of Community activities in favour of SMEs 
and the Craft Sector, OJ N° C 130, 3.5.1996, p. 1. 
10 See Article 130 §2 of the Treaty. 
11 i.e. contributions through policies and activities the Community pursues in the framework of the 
Treaty, as well as through specific measures in support of action taken in Member States 
(Article 130 § 3 of the Treaty). 
IV 
actions contained in the proposed Third Multiannual Programme for SMRs ( 1997-
2000).12 
Main features of the Integrated Programme for SMEs 
The Integrated Programme facilitates greater coordination of Member States' 
actions affecting SMEs. It envisages "concerted actions" which are based on an 
exchange of best practice between Member States. The concerted actions aim at 
increasing the efficacy of Member State actions in the field of the improvement of 
the business environment and the stimulation of business support measures, in 
particular through a better targeting and convergence of policy measures. 
The Integrated Programme also ensures better coordination of the various 
contributions the Community is making in favour of SMEs through its various 
poHoies and programmes. The objectives of this coordination consist in ensuring 
better recognition of the SME dimension in the various Community policies and 
programmes, facilitating increased participation of SMEs in Community supported 
actions, and more effective consultation with organisations representing SMEs. 
The results of the Commission's coordination activities will be evident from the reports on 
the inclusion of the SME dimension in all Community policies and programmes.13 
Hi. THE RELATIONSHIP WITH THE 1994 INTEGRATED PROGRAMME 
This Communication updates and develops the 1994 Integrated Programme. It sets out a 
global framework for SME Policy which is based on the same methodology while aiming 
at new objectives and presenting an array of new measures. 
• the same methodology 
The approach proposed in the 1994 Integrated Programme remains unchanged. It is based 
on the three types of instruments described above (the Multiannual Programme, concerted 
actions with Member States and other Community actions in support of SMEs). 
• enlarged objectives 
The 1994 Integrated Programme was a direct consequence of the Commission's White 
Paper on Growth, Competitiveness and Employment. It spelled out the priorities 
formulated in the White Paper concerning the contribution of SME policies to the 
attainment of its objectives. The 1994 Integrated Programme made a distinction between 
measures aiming at improving the business environment and those aiming at stimulating 
business support services, while focusing on the various stages of the life cycle of 
enterprises. 
This updated Integrated- Programme builds on this distinction, in particular by 
concentrating the various measures on the new strategic objectives identified in the 
12 OJn°C 156, 31.5.1996, p.5. 
13 Article 5, paragraph 2, of the Proposal for a Council Decision on a Third Multiannual Programme 
for SMEs, OJ n° C 156, 31.5.1996, p.5. 
Madrid SME Policy Paper and reemphasized in the European Confidence Pact for 
Employment. 
1994 Integrated Programme 1996 Integrated Programme 
1. Improve the business 1. Improve the administrative and 
environment regulatory business environment 
2. Improve the financial and fiscal 
environment 
2. Stimulate business support 3. Help SMEs Européanise and 
measures internationalise 
4. Enhance SME competitiveness 
5. Promote entrepreneurship and special 
;.'. .. •• „.,-,.• : target groups 
• neyv actions 
The formulation of an updated Integrated Programme does not imply that all actions set 
out in the 1994 Integrated Programme are completed or are less relevant. Actions 
designed to meet the objectives of the 1994 Programme will continue to be implemented. 
Compared to the 1994 Integrated Programme, this Communication sets out a number of 
additional initiatives in favour of SMEs as well as identifying actions in the framework of 
other Community policies which will take account of the new priorities in their 
implementation. Some of these actions still have to be adopted by the Council, or even to 
be proposed by the Commission. 
Value added: new key actions 
Concerted actions • access of SMEs to the Information Society 
• forum on entrepreneurship 
• forum on craft and small enterprises 
• forum on commerce 
Actions under other • simplifying internal market legislation (SLIM) 
Community policies • loan guarantees for employment (ELISE) 
• EIF equity support for SMEs 
• introduction of the Euro 
• instrument for transnational investment within the 
EU 
• support for international cooperation 
• innovation in SMEs 
• marketoriented technological development 
Specific SME Policy actions • Third Multiannual Programme for SMEs (1997-
1 2000) 
VI 
IV. THE PLACE OF THE THIRD MULTIANNUAL PROGRAMME FOR SMEs 
The Multiannual SME Programme is an essential part of the framework of the Integrated 
Programme. It provides the legal and budgetary basis for the Community's specific actions 
in favour of SMEs which are not covered by other Community policies. The current 
Multiannual Programme expires on 31 December 1996. The proposal for a Third 
Multiannual SME Programme14 - now before the Council of Ministers for final adoption -
aims at "maximising European SMEs' full potential for employment, growth and 
competitiveness". It has received the unanimous endorsement of the European business 
organisations representing SMEs15 and will cover the period 1997 - 2000. The Florence 
European Council has urged the Council to adopt this Programme by the end of 1996. 
V. CONTENT OF THE INTEGRATED PROGRAMME FOR SMEs 
The synoptic table on the following pages sets out the main features and specific policy 
actions of the updated Integrated Programme for SMEs. 
14 Commission Proposal for a Council Decision on a Third Multiannual Programme for SMEs in the 
European Union (1997-2000). OJ n° C 156, 31.5.1996, p.5. 
15 CCACC, CECOP, CEDI, EMSU, EUROCHAMBRES, EUROCOMMERCE, EUROPMI, UEAPME, 
UNICE and YES for Europe. 
Vil 
INTEGRATED PROGRAMME FOR SMEs 
Concerted Actions Actions initier other ( oinmnnity policies Multiannual SME I'rogramme' 
I. SIMPLIFY AND IMPROVE THE ADMINISTRATIVE AND REGULATORY BUSINESS 
ENVIRONMENT 
• Committee on Improving • Guidelines for regulatory policy (including • New approach to Business Impact 
and Simplifying the better consultation) Assessment System (including 
Business Environment „., _ ,.. . Ti ,»,, methods for cost/benefit 
• Pilot action for simplifying Internal Market , .. . 
legislation (SLIM) evaluation) 
^ „ ,, ,. • Transfer of businesses 
• Follow-up to Mohtor report 
„. ,rA„ • Dispute settlement procedures 
• Simplify new common VA 1 system 
• Appropriate legal instruments 
n. IMPROVE THE FINANCIAL AND FISCAL ENVIRONMENT FOR SMEs 
• Better access to • Better targeting of Community support for • Late payment 
finance and capital SMEs, including EIF loan guarantees for „ , .„ , , _ , ,„»,,-, 
, . , ,,,, ,,M.,i ..... • Round I able Bankers and SMEs 
markets employment at reduced rales (LLISh),- Ell* 
equity support for SMEs, and reorientation of • SME capital markets, including 
Structural Funds'support,3 EIB loans EASDAQ 
• Fiscal environment of businesses • Mutual Guarantee Schemes 
• Introduction of the Euro • Factoring and credit insurance 
lit HELP SMES TO EUROPEANISE AND INTERNATIONALISE THEIR STRATEGIES, 
IN PARTICULAR THROUGH BETTER INFORMATION AND COOPERATION SERVICES 
• Administrative • Access to the Single Market • Partner search networks 
cooperation- - More competition and encourage reduction 
Single Market State aid * Direct partnerships 
- Cross-border public procurement . Promotion of European Economic 
- Standards and certification Interest Groupings (REGIE) 
- Transnational investment within the EU4 
• EICs as first stop shops 
• Access to third countries 
- Reduce trade barriers ' "«[working of providers of market 
- Improve multilateral rules on FD1 information 
- Facilitate international cooperation with 
enterprises in Third Countries5 
IV. ENHANCE SME COMPETITIVENESS AND IMPROVE THEIR ACCESS TO RESEARCH, 
INNOVATION, INFORMATION TECHNOLOGIES AND TRAINING 
• Business services • Competitiveness and modernisation of SMEs • Promotion of subcontracting 
(including in the field - Structural Funds6 (incl. SME Initiative7) „r. x 1% ,,„,,,„., „,.„„ 
V ? \ i i • • i ,••• • COMMERCE 2000 
ot innovation) - Industrial competitiveness 
. - Local development initiatives8 . Innovation by SMEs (e.g. New 
• SME actions in the J v h 
field of research • Action Plan for Innovation9 ^ ' 
(CREST) . Access to R&TD10 . Management training for SMEs 
r CA/TC " access to Community R&TD Programmes 
T . . - market-oriented technological development 
Information Society # Accesg of SMEs tQ the Mormation Societyi, 
, , ,-™,r. • Environmental requirements12 
the needs of SMEs i -i 
energy saving'-1 
• Access to training1'4 
including in the area of new technologies's 
V. PROMOTE ENTREPRENEURSHIP AND SUPPORT SPECIAL TARGET GROUPS 
• Entrepreneurship • Follow-up White Paper on Education • Promote entrepreneurship 
• Forum on Craft and • Access of craft enterprises to Single Market • Craft and small enterprises 
small enterprises „, ,, ,, , ,. ., 
• Women entrepreneurs11' • Commerce and distribution 
• Forum on Commerce 
• Women and young entrepreneurs 
vin 
Principal Sources of Finance 
1 Multiannual Programme for SMEs 1997-2000 : budget proposed: ECU 180 million; 
2 European loan insurance scheme for employment (ELISE): ECU 25 million (in 1996); 
3 New orientation of Objective 2 Support (ECU 8.15 billion for 1997-1999); 
4 Financial instrument for transnational investments by SMEs within the EU; 
5 MED-INVEST 1997-2000: ECU million; AL-INVEST 1995-2000: ECU 41 million; AS-INVEST 
1996-2000: ECU 32 million; ECIP 1995-1999: ECU 250 million; JOP PHARE/TACIS 1996-2000: 
ECU 70 million; 
6 Structural Funds 1994-1999: Community Support Frameworks, Community Initiatives and pilot 
projects; 
7 Community Initiative for SMEs 1994-1999: ECU 1 billion; 
8 LEADER Community Initiative 1994-1999: ECU 1.4 billion and URBAN Community Initiative 
1994-1999: ECU 0.6 million; 
9 Follow-up of the conclusions of the Florence European Council; 
10 4th Framework Programme R&TD 1994-1999: various projects accessible to SMEs within [ 12.3] 
billion allocation; 
11 ISAC: ECU 44 million; 
12 Growth and Environment Pilot Project: ECU 14 million in 1996 (+ 5 MECU in 1997); 
13 THERMIE II: ECU 500 million; SAVE II: ECU 45 million; 
14 ADAPT Community Initiative 1995-1999: ECU 2.9 billion (of which 1.4 billion ECU from the 
Structural Funds); LEONARDO 1995-1999: ECU 620 million; Training and Mobility of 
Researchers Programme (1995-1998): ECU 744 million; 
15 ADAPT-BIS reinforcement of the ADAPT Initiative 1997-1999: ECU 162 million; 
16 EMPLOYMENT NOW: ECU 100 million; European Social Fund (local employment initiative for 
women) and European Regional Development Fund. 
PRIORITY MEASURES 
I. SIMPLIFY AND IMPROVE THE ADMINISTRATIVE AND REGULATORY 
BUSINESS ENVIRONMENT 
European enterprises face an increasingly complex legal, fiscal and administrative 
environment. While the cost of non-regulation has never been measured, the total annual 
cost of administrative burdens on all enterprises in Europe has been estimated at between 
180 and 230 billion ECU16. Although part of this burden is unavoidable, what matters 
most is the relatively much higher impact on SMEs than on large companies (see 
following box). SMEs do not have the resources to cope with this burden and often 
cannot afford outside help. 
Administrative burdens on SMEs 
According to a German study17, the average time spent by businesses on 
administrative work amounts to over 700 hours a year. A business with up to 9 
employees devotes 62 hours per employee to administrative formalities. For a larger 
company, however, this figure is much lower at 5 1/2 hours. The same study stated 
that the relative cost of administrative burdens per employee is up to more than 20 
times higher in smaller enterprises than in larger ones. Administrative complexity is 
particularly important in the areas of labour, environmental and tax legislation. 
Such compliance costs discourage new business creation and recruitment. Reducing the 
structural bias against SME creation and development resulting from excessive 
bureaucracy is therefore of primary importance particularly at national level.18 
Early consultations of SME organisations are a prerequisite for a successful policy in this 
context. Member States and the Commission should improve consultation of SME 
organisations when preparing policies of relevance to them, and should encourage their 
full involvement. The participation and representation of SME organisations in 
Community structures needs further consideration. 
The issue of representation of SMEs in the autonomous social dialogue at European level 
is a sensitive and controversial matter. The Commission expressed its position on this 
matter in its 1993 Communication on the application of the Social Protocol. The 
Commission will review the state of play on this issue in its forthcoming Communication 
on the Social Dialogue to be adopted in the second half of 1996. 
16 
17 
18 European Observatory for SMEs, Third Annual Report, 1995. 
1995 study by the Institut fur Mittclstandsforschung. Similar figures are contained in the 1996 
Report submitted by the Committee m Enterprise Creation established by the Danish Ministry of 
Economic Affairs. 
Commission SME Report for the Madrid European Council, CSE(95) 2087, p. 10 and Single Report 
from the Council and the Commission on Employment, SI(95) 1000, Part B, Annex 2, p. 15. 
A±> 
A. CONCERTED ACTIONS 
An important step in this direction has been taken in the framework of the 1994 Integrated 
Programme by creating the Committee on Improving and Simplifying the Business 
Environment. This Committee is the expression of the joint commitment of Member 
States and the Community to a policy of administrative and regulatory simplification. It 
constitutes the framework for an exchange of best practice in this field. In order to ensure 
a practical follow up, the results of the Committee's work will be set out in a report to the 
Council and where appropriate in recommendations to the Member States. 
The first indications from the workings of this Committee have shown that some Member 
States have developed a bold strategy for administrative simplification. The experience 
gained from the relevant work programmes should lead other Member States to adopt 
similar programmes as suggested by the Molitor Report19, with specific dates and targets 
in terms of reductions of costs for SMEs. The Committee will also develop common 
criteria for bench marking in the area of administrative simplification.20 A beginning will 
be made during the discussions of the working groups which have been created by the 
Committee in the wake of the Paris Forum of June 1995 and which will examine inter alia 
simplified start-up procedures for new SMEs as well as the automatic granting of licences 
or authorisations failing reaction from the administrative authorities in a given time period 
following receipt of an application. 
The work programme of the Committee will continue to build on the approach based on 
the life-cycle of enterprises (creation, development and transfer of businesses) and in 
addition focus on the priority areas identified in the Madrid SME Policy Paper, in 
particular the simplification of environmental and tax legislation. 
As regards the simplification of labour legislation21 and the introduction of more flexible 
working time, the joint report of the Council and the Commission on employment22 has 
led the Madrid European Council to confirm these priorities for a joint action. This is 
another important area in which the exchange of best practice can lead to co-ordinated 
action between Member States. 
19 Report of the Group of Independent Experts on Legislative and Administrative Simplification, 
COM(95) 288 final of 21.06.1995, p.83. 
20 The benchmarking approach will be followed also in Concerted Actions concerning support 
measures. 
21 For instance, measures to adapt provisions on recruitment, maintenance, lay-off of workers and 
maternity leave to be more flexible and operational. In addition, measures could be introduced to 
adopt more consistent thresholds for SMEs in order to compensate for the cost disadvantage of 
SMEs vis-à-vis large competitors. 
22 Single Report from the Council and the Commission on Employment, SI(95) 1000 of 16.12.95, part 
B, Annex 2, p. 16. 
B. COMMUNITY CONTRIBUTIONS 
A number of measures concerning simplification of Community legislation have been 
taken already such as the implementation of the business impact assessment system and 
the follow-up given by the Commission to the recommendations of the Molitor group.23 
New measures will include the implementation of the recently adopted guidelines for 
regulatory policy which will improve the quality of Community legislation and lead to 
better consultation of interested parties, including SME organisations. An improved, more 
pragmatic method for the implementation of cost/benefit evaluation is foreseen among the 
measures to be taken in the framework of the Third Multiannual Programme for SMEs. 
In the specific area of Internal Market legislation the Commission has recently 
strengthened its ongoing efforts of legislative simplification by launching a Pilot Project to 
assess how best to reduce the burden on business of Single Market rules in particular 
sectors. The exercise will provide a test bed for more wide ranging actions. The work will 
be carried out by small teams each devoted to the examination of a particular area. These 
"SLIM" teams will bring together the Commission, representatives from Member States 
and those concerned by legislation such as business, including SMEs. They will also try to 
identify any aspects of national legislation affecting the Single Market that might result in 
unnecessary burdens. The Florence European Council calls on the Commission to submit 
to the Council before the end of 1996 the initial results of its initiative on practical 
simplification measures. 
In the field of social legislation, the Social Policy Action Programme24 includes proposals 
for revising, clarifying and consolidating Community Directives, in particular in the areas 
of transfers of undertakings25 and collective dismissals26, and the codification and 
simplification of the Community Regulations coordinating social security schemes27. 
SMEs should remain involved in this process. 
As regards the Community's environmental legislation the Commission will continue to 
propose means to ensure that companies are able to integrate environmental 
considerations in their policies in a more flexible and simple way. This involves the 
simplification of existing legislation, including repealing outdated legislation and, where 
appropriate, the adapting of this legislation to make it more receptive to market-based 
instruments, including negotiated or voluntary agreements. This approach would then 
support traditional regulatory action, thereby reducing the need for further command and 
control type regulations. 
23 Commission Comments on the Report of the Group of Independent Experts on Legislative and 
Administrative Simplification, COM(95) 596 final. 
24 COM(95) 134 final of 12.04.1995. 
25 Council Directive 77/187/EEC of 14.02.1977 on transfers of undertakings. OJ L 61 of 5.3.1977. 
26 Council Directives 75/129/EEC and 92/56/EEC on collective redundancies, OJ L 245 of 26.8.1992. 
27 Council Regulations 1408/71/EEC and 574/72/EEC, OJ L 335 of 30.12.1995. 
Of primary importance also will he the proposal for a simple Common VAT system for 
the Single Market which I he Commission intends to submit as icqucslcd by the Council 1H 
In this context the Commission is proposing a working programme for a Common VAT 
system.29 After consultation with Member States proposals will be made aiming primarily 
at the following objectives : 
• Ensure equal treatment of domestic and intracommunity trade in goods and services, 
in order to allow SMEs to operate from their place of establishment throughout the 
Community without facing additional administrative burdens; 
• Reduce uncertainty and complexity in the application of VAT, by providing 
businesses with a Common VAT system which is uniformly applicable and which 
meets the requirements of a true Single Market; 
• Reduce the uncertainty caused by different interpretation of the rules, by considering 
a new role for the VAT Committee. As is already the case in the field of customs and 
excise duties, the Council could confer upon this Committee the task of assisting the 
Commission in adopting implementing measures. 
28 Conclusions of the Council of 24.10.1994. 
29 A Common VAT system for the Single Market, COM(96) 328. 
IL IMPROVE THE FINANCIAL AND FISCAL ENVIRONMENT FOR SMEs 
Compared to larger firms, SMEs are much more dependent on internal sources of funds 
(i.e. owners' own capital and retained profits) than external sources of finance. They often 
have problems accessing bank loans at reasonable rates, or raising equity on the markets, 
and frequently rely on informal sources (family, friends) for external funding. The Madrid 
SME Policy Paper identified a number of failures in the financial and fiscal environment of 
SMEs which hamper their development. 
Key problems in SMEs' financial and fiscal environment 
Under-capitalisation of European SMEs 
Difficulties in obtaining loans 
Absence of a European capital market for SMEs 
Problems of late payment 
Preparation for the introduction of the Euro 
A. CONCERTED ACTIONS 
While the issue of a better access to finance and capital markets for SMEs has been 
addressed in part-10 this topic warrants more specific attention. Therefore the Commission 
will organise a special forum for the exchange of best practice in this field. 
As regards the reduction of non-wage labour costs resulting from national regulations, the 
Commission has pointed out that relatively high taxes and social security contributions on 
labour hit SMEs hardest. The need to shift taxes away from labour was again emphasised 
in the Commission's recent Discussion Paper on "Taxation in the European Union".31. In 
this context the Florence European Council requested the Council to submit a report on 
the development of tax systems within the Union, taking account of the need to create a 
tax environment that stimulates enterprise and the creation of jobs.32 
B. COMMUNITY CONTRIBUTIONS 
The Third Multiannual SME Programme includes a number of initiatives to improve the 
financial environment of SMEs (e.g. late payment, Round Table of Bankers and SMEs, 
mutual guarantee schemes, factoring and credit insurance, pilot scheme for New 
Technology Based Firms, capital markets for fastgrovving SMEs). These measures 
complement those taken under other Community policies to improve the financial 
environment of SMEs. 
30 In the framework of the 1994 Integrated Programme, a Concerted Action (n° 2) has been organised 
to exchange best practice in the field of business support measures including financial instruments 
for business start-ups. 
31 SEC(96) 487 of 20.03.1996 
32 Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.3. 
6 
1. Better targeting of Structural Policies towards SME development 
The Commission's European Confidence Pact for Employment-" highlights the need for a 
better orientation of Community financial instruments (including European Investment 
Bank (EIB), European Investment Fund (EIF) and budgetary support instruments) 
towards SME development. 
In this context the Commission has proposed a European Loan Insurance Scheme for 
Employment (ELISE).34 Under this scheme the Community will bear the cost of premiums 
for guarantees extended by the EIF. Particular priority will be given to small enterprises 
(fewer than 50 employees). This Programme builds on the experience gained through the 
"Growth and Environment" pilot project. 
The SME Report for the Madrid European Council highlighted the need to increase the 
supply of equity capital for SMEs through the EIF. Following the favourable decision by 
the EIF's General Meeting on 18 June 1996, sufficient amounts will be invested by the EIF 
in order to provide a leverage to the capital of financial intermediaries such as venture 
capital funds. This will have a beneficial effect on the access of SMEs to venture capital. 
In the area of the Community structural funds the Commission recently proposed 
guidelines35 in the perspective of the negotiations of the second programming period 
1997-1999 for the declining industrial areas (Objective 2 areas) where the first priority is 
recognised as competitiveness and the development of SMEs. In addition, the Florence 
European Council subscribed to the Commission's recommendation to focus structural 
policies more on job creation, in particular by concentrating available margins of the 
structural funds for the support of SMEs in partnership with the EIB.36 
More generally, SMEs are still not benefiting sufficiently from many Community actions 
and programmes compared to their share of economic activity and their employment 
growth potential.37 The Commission will therefore identify ways to enable SMEs to fully 
participate in all Community programmes. Concrete action under the SME Multiannual 
Programme will include a Recommendation to Member States on ways to increase the 
share of SMEs in Community policies and programmes.38 
33 CSE(96) 1 final of 5.6.1996. 
34 Proposal for a Council Decision on the provision of loan guarantees for investments carried out by 
SMEs creating employment, OJ N° C 146, 21.5.1996, p.6. 
35 Note for guidance concerning operations in the declining industrial areas (objective 2) for the second 
programming period 1997-1999, C(96) 952, April 1996. 
36 Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.4. 
37 For instance, in the area of the Structural Funds (See Annual Report of the Court of Auditors (1994), 
OJN°C 303 of 14.11.1995, p. 140), R&TD and international co-operation programmes. 
38 Third Multiannual SME Programme, Section II. A. 1 of the Explanatory Memorandum. 
7 
2. Improve the fiscal environment of SMEs 
- Tax treatment of transnational operations of SMEs 
The recent Commission Discussion Paper on "Taxation in the European Union"39 
highlighted the complaints of businesses involved in transnational trade. The list of 
problems is long and includes the treatment of permanent establishments of SMEs in other 
Member States compared to domestic companies, cross border interest and royalty 
payments and losses of permanent establishments and subsidiaries in other Member States. 
As a follow-up to this Discussion Paper the Commission will present a communication on 
direct taxation which will focus on the needs and challenges of a properly functioning 
single market. The Commission identified relevant areas in which the Single Market does 
not appear to be working effectively as cross-border interest payments, taxation of 
permanent establishments40 and the adequacy of bilateral tax conventions for a fully 
developed Single Market.41 
- Adjust the fiscal environment to SMEs' needs 
The Single Report from the Council and the Commission on Employment emphasised the 
need to adjust the fiscal environment of SMEs42. In this context the Commission will in 
particular ensure a further response to the Communication of 25 May 1994 on the 
improvement of the tax environment of SMEs.43 This Communication covered four 
priority areas: self-financing, fiscal treatment of venture capital, administrative complexity 
and transfer of businesses. On the issue of self-financing, the Commission has adopted a 
Recommendation to the Member States.44 A Recommendation has also been addressed to 
Member States in the area of transfer of businesses.45 
An important issue is the under-capitalisation of European enterprises in comparison with 
their counterparts elsewhere. This is partly because national tax systems in the European 
Union discriminate in favour of debt financing and against equity financing. SME^s are 
particularly affected, since they have fewer financing options than large enterprises. In line 
with the Madrid SME Policy Paper, the Commission will identify best practices, where 
appropriate by recommendation, with a view to ensure more even handed tax treatment of 
equity and debt financing. 
39 SEC(96) 487 of 20.03.1996. 
40 This issue was dealt with in the Commission Communication of 25.5.1994 on the improvement of 
the tax environment of SMEs (COM(94) 206 final of 25.5.1994). This would imply to tax the 
foreign activities of SMEs, under certain conditions, only in the Member State of residence of the 
enterprise. The result would be a major simplification for the enterprises concerned as they would 
only have to deal with one tax system which would lead to less compliance costs. 
41 SEC(96) 487 of 20.03.1996 
42 SI(95) 1000 of 16.12.1995, part B, Annex 2, p. 15. 
43 COM(94) 206 final of 25.5.1994. 
44 OJN°L177of9.7.1994, p.l. 
45 Commission Recommendation on the transfer of small and medium-si/.cd enterprises, COM 
(94)3312 of 07.12.94 
3. Preparation of SMEs to the introduction of the Euro 
Economic and Monetary Union will have positive effects on business, both from the 
macroeconomic and microeconomic point of view. Transition to a single currency will 
require careful preparation. Thus, special attention should be paid to the most vulnerable 
groups of users, among them SMEs and especially SMEs in the commerce sector. The 
Commission has already widely consulted interested parties, including SMEs, and intends 
to continue to consult them. 
Those who defend the interests of SMEs such as the professional organisations 
representing SMEs, commerce, tourism, accountants, banks and chambers of commerce, 
at European and national level, must take up their cause and guarantee them the support 
they need. Among the aforementioned groups, the Commission, given its privileged 
position, has a special role to play. The Commission will, on the one hand, make sure 
SMEs are given full consideration throughout the process of developing Euro related 
regulations, and on the other include an SME focus in its information and communication 
strategy on the Euro. This latter means, encouraging SME groups to launch information 
campaigns and, providing them with the necessary support through the Euro-Info-Centre 
Network (EICs). The latter will have a key role to play, particularly as regards identifying 
problems SMEs will have to confront and in disseminating proposed solutions. The 
Commission has recently launched an information programme called "Euro: one currency 
for Europe". In this programme special attention will be given to providing information to 
SMEs concerning the implications of the single currency on them. 
III. HELP SMES TO EUROPEANISE AND INTERNATIONALISE 
THEIR STRATEGIES, IN PARTICULAR THROUGH BETTER 
INFORMATION AND COOPERATION SERVICES 
Despite clear evidence that the Internal Market legislative programme has already begun 
to reap benefits for business, SMEs in particular are still having difficulties in gaining 
access to parts of the market. Similar and arguably greater barriers exist in accessing third 
markets. The major problems include: 
Barriers to Europeanisation and internationalisation of SMEs 
distortions of competition; 
delays in national transposition and differences in compliance and enforcement; 
difficulties in accessing standards and certification; 
barriers to participation in public procurement; 
lack of comprehensive market intelligence; 
difficulties in identifying suitable partners. 
A. CONCERTED ACTIONS 
Delays in national transposition and differences in compliance, interpretation and 
enforcement cancels out the harmonisation effect of Community-wide legislation, thereby 
creating barriers for the Europeanisation of SMEs. The Florence European Council 
emphasised once again the essential contribution made by the internal market to 
promoting growth and employment. It called on Member States to speed up the full 
implementation of the Directives concerning the internal market, in particular in the public 
procurement, investment services and insurance fields.46 
In line with a Council Resolution of 10 October 1994 on support measures for SMEs47, 
the Commission recently issued a progress report on the enforcement of the internal 
market legislation recommending the setting up of contact points in national 
administrations to help enterprises, in particular SMEs, to deal with possible intra-
Community trade barriers. Such contact points for enterprises, which already exist in 
some Member States, should be linked to the inter-administration network, to which 
SMEs do not have direct access. In this way solutions to their problems could be found 
more rapidly. This will complement the Commission's efforts to step up actions to ensure 
an efficient treatment of complaints against intra-Community trade barriers. 
The move towards Economic and Monetary Union will also favour the Europeanisation 
and internationalisation of SMEs, in particular by reducing costs in trading internationally. 
Compared to large enterprises these costs are higher for SMEs. 
46 Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.2. 
47 Council Resolution of 10.10.1994 on giving full scope to the dynamism and innovatory potential of 
SMEs, including the craft sector and micro-enterprises, in a competitive economy, OJ n° C 294 of 
22.10.94, p.6. 
B. COMMUNITY CONTRIBUTIONS 
1. Euronennisation of SMEs: exploiting the full potential of the Single Market 
a. Improve information and cooperation services for SMEs 
European SMEs often lack access to essential information on markets in other Member 
States and on Community SME programmes. They also have difficulties in identifying 
suitable partners. The Third Multiannual Programme for SMEs therefore proposes new 
measures in the field of information services (e.g. the strengthening of the role of Euro-
Info-Centers as "first-stop-shops" and the networking of providers of global or regional 
market intelligence). In addition, the new Multiannual Programme will give further 
impetus to Community instruments which facilitate business cooperation and partnerships 
between SMEs and large enterprises and also between small enterprises themselves. 
b. Strengthen competition and reduce distortions from State Aid 
The Madrid SME Policy Paper and the Single Report from the Council and the 
Commission on Employment48 emphasised that the completion of the Single Market must 
be supported by a vigorous competition policy in order to eliminate excessive rigidities in 
the product and services markets (for example, in the telecommunications and energy 
markets). In particular, a number of structural constraints must be removed in order to let 
the potential for enterprise and employment creation, in particular in the service sector, be 
exploited to the full. The Commission will therefore pursue its efforts to: 
• Promote competition in those fields where there are still monopolistic practices, for 
instance in the energy markets49 
• Encourage the reduction of the level of State aid, taking account of regional 
differences and other Community objectives, by subjecting it to tighter control (as 
recommended by the Council).50 
• Examine the need for clarifying the Community competition rules applicable to co­
operation between SMEs, for example, co-operation in networks for joint purchases 
and sales.51 In addition, the Commission's forthcoming Green Paper on Vertical 
Restrictions will in particular deal with relations between producers, wholesalers and 
retailers. During the last twenty years, growing concentration among commercial 
enterprises and the development of new forms of co-operation has made it vital to 
ensure that the conditions for fair competition between economic actors exist, whilst 
guaranteeing the same market opportunities. 
48 SI(95) 1000, part B, annex 2, p. 15. 
49 See the political agreement reached within the Council on 20 June 1996 concerning a common 
position on the liberalisation of the electricity market. 
50 Council Conclusions of 6-7 November 1995 on competition policy and industrial competitiveness. 
51 Council Resolution of 10 October 1994, OJ N° C 294 of 22.10.94, p.6. 
11 
c. Facilitate access to cross border public procurement 
Public procurement markets represent approximately 15 % of combined GDP in the 
European Union. However, the share of SMEs in these markets is not proportionate to their 
importance in the economy. In order to facilitate access by SMEs to transnational public 
procurement markets the Commission will adopt a report to the Council on measures to 
assist SME participation in public procurement. This report will list a number of actions in 
this field including the following measures: 
• the review of the effectiveness of existing services which provide facilities not readily 
available to SMEs because of their si/.e, but which are an essential ingredient of success 
in public procurement markets; 
• action to ensure that the European Economic Interest Grouping (EEIG) can participate 
on an equal footing when bidding for public contracts, so that they may be better utilised 
as a vehicle whereby SMEs may combine resources. The Commission will produce a 
Commission Communication on this issue by the end of 1996; 
• examine methods of improving the prospects of smaller subcontractors; 
• the promotion of open and simpler procurement practices among contracting entities; 
• enlarging and improving information on sub-threshold contracts, contracting authorities, 
national rules and European standards and technical requirements readily accessible in an 
easily comprehensible format; 
• speeding up the introduction of information technology, such as SIMAP, in order to 
provide SMEs and networks serving them, especially in frontier areas, with more 
detailed information, for example, on products and smaller contracts. 
a\ Standards and certification 
The Europeanisation and internationalisation of SMEs is still hampered by persisting 
technical barriers to trade. Within the EEA these barriers result from the lack of 
acceptance of the mutual recognition principle, the slow pace of the European 
standardisation process and the lack of SME involvement. Additional costs appear for 
SMEs when European standards are adopted and outdated national standards have to be 
withdrawn. Though voluntary in principle, these European standards have to be applied by 
all SMEs, irrespective whether they produce for the national or European market, if they 
want to stay in the market. 
12 
With a view to alleviate these problems the Commission will take the following measures: 
• increase its effort to encourage the participation of SME-intermediaries in the 
European technical standard setting process; 
• inform SMEs of their rights in the case of denial of the benefit of the principle of 
mutual recognition of national standards by public or private purchasers and 
encourage them to lodge complaints; 
• strengthen actions to better inform SMEs of the opportunities resulting from 
European standardisation and certification; 
H encourage the European standardisation Committees to give priority to performance 
standards instead of product standards. 
e. Facilitate transnational investment by SMEs within the EU 
Less than 3% of Community enterprises (about 460.000) engage in transnational 
activities. In view of the employment and growth potential of SMEs a considerably higher 
number of European enterprises should be encouraged to participate in transnational 
trade. One of the major factors which discourages SMEs to make transnational 
investments relates to the financing of such operations. 
Currently, the banking system is not sufficiently meeting requirements and, with the 
exception of the specific provisions on transnational investment contained in the ELISE 
scheme, no financial instrument exists for supporting SMEs willing to make transnational 
investments or considering joint venture agreements with businesses from other Member 
States. The experience with financial instruments for stimulating co-operation between 
Community SMEs and enterprises from third countries (e.g. JOP and ECIP) suggests that 
similar initiatives within the Community would yield significant results, in particular in 
view of the need to stimulate investments with growth and employment potential. The 
transnational nature of these instruments justify a Community initiative in this field. 
Therefore the Commission will consider the possibility of launching of a pilot project for a 
Community financial instrument with a view to encouraging cross-border investment and 
joint ventures within the Union. Such an instrument would be designed to support, 
through a network of banks and venture capital funds, the efforts of SMEs who are 
creating or developing an activity in another Member State. 
The pilot project would cover all the necessary steps involved in a cross-border 
investment, such as a company's general activity with respect to accessing new markets 
(supply of specific information, selection of partners, identification of new market 
opportunities), preparation of operations abroad (market studies, legal assistance), 
financing of the investment through long term capital resources, and finally, technical 
assistance (transfer of know how). 
With a view to maximising the potential of such an instrument, its operation should have 
two main features: on the one hand, sharing of the risk by the Community, the SMEs and 
the financial intermediaries, and on the other hand, an ad-hoc reimbursement mechanism 
based mainly on the success of the projects. 
13 
2. Internationalisation of SMEs: access to third country markets 
g. Reduce trade barriers to third countries 
Helping European SMEs internationalise is equivalent to boosting their competitiveness. 
Following the Uruguay Round Agreements, renewed emphasis should be placed on 
pursuing market access strategies vis-à-vis third countries. A more open world market 
offers the best possibilities for European firms and particularly SMEs to compete 
internationally. In this general context, the Trade Barriers Regulation is a crucial tool to 
ensure that the obligations assumed under international trade rules, be they multilateral or 
bilateral, are adhered to. Under the Trade Barriers Regulation an obstacle to trade can be 
tackled both through resort to international dispute settlement and/or through a negotiated 
settlement with a third country. European business, and especially SMEs should, 
therefore, be encouraged to take greater advantage of the Trade Barriers Regulation 
which allows the European Union to tackle individual barriers in cases in which companies 
feel most aggrieved by them. Resort to the Trade Barriers Regulation is particularly 
relevant for SMEs, since available evidence suggest that trade barriers although affecting 
both large enterprises and SMEs, create particular difficulties for the latter. 
b. Improve multilateral rules on Foreign Direct Investment 
An increasing role of SMEs in international investment activities will be of particular 
importance for the Union Europe should be able to profit fully from the world-wide trend 
of liberalising Foreign Direct Investment (FDI). European firms, including SMEs, have 
experience of investing away from home as a result of intra-Community trade where few 
restrictions on FDI remain. European firms are in a good starting position when it comes 
to making use of investment opportunities. To build on this position European companies 
would greatly profit from an effective world-wide regulatory framework for FDI in which 
the right to invest and fair treatment by the host country are firmly established. This does 
not exist at present. 
In this general context there is a need for transparent, coherent and liberal multilateral 
rules on Foreign Direct Investment. The work currently done within the OECD in the 
direction of elaborating a multilateral investment agreement, and which may be continued 
in the WTO, is a valuable contribution to strengthening the multilateral system and 
assisting European SMEs. 
c. Facilitate international co-operation with enterprises in third countries 
With a view to developing a more coherent policy and access to a more coherent service 
for companies in the area of business co-operation, the existing Enterprise Policy 
networks and partnerships programmes (EICs, BC-Net and BRE, EUROPARTENARIAT 
and INTERPRISE) will be improved, including in particular the search for synergies with 
other Community policies. A limited number of pilot activities will be conducted aimed at 
improving the awareness of European SMEs about strategic advances of SMEs in third 
countries as well as at strengthening the access of European SMEs to third countries.52 
52 Third Multiannual SME Programme, COM(96) 98 final of 20.03.1996, Section U.C. 
14 
The internationalisation programmes will be continued to ensure a presence in all CEEC 
countries, the Mediterranean, Latin America, Asia and in South Africa. The appropriate 
location of the national contact points of the co-operation networks will be decided as a 
function of mutual needs. 
Direct contacts between entrepreneurs will be strengthened through Partenariat and 
Interprise methodologies in priority areas, with the financial support of External Relations 
Programmes aimed at promoting the development of enterprises in third countries. 
In addition, special attention will be attached to SMEs in the framework of the strategy of 
pre-accession with candidate Central and East European Countries (CEECs), as well as 
Malta and Cyprus. 
Finally and within the framework of the Joint EU-US Action Plan, several of the 
objectives mentioned therein are of particular significance for SMEs. Joint initiatives and 
suggested measures with regard to market access, standards and certifications, 
information technologies and telecommunications as well as other regulatory areas are 
expected to have a positive impact on European SMEs. These initiatives could include 
focused partnership actions with the United States, in particular for co-operation aiming at 
strategic sectors and connected to subcontracting. 
15 
IV, ENHANCE SME COMPETITIVENESS AND IMPROVE THEIR ACCESS 
TO RESEARCH, INNOVATION, INFORMATION TECHNOLOGIES 
AND TRAINING 
The Madrid SME Policy Paper identified a number of elements which hamper the 
competitiveness of European SMEs. 
Barriers to competitiveness of European SMEs 
The business environment in Europe (in particular, the lack of sufficient risk 
capital, the existence of significant regulatory barriers and a lower propensity to 
take risks) are not as conducive to the development of New-Technology-Based 
Firms (NTBF) as in the US. 
Technology-intensive SMEs need much better access to Community-funded 
R&TD programmes. They also need to network better with each other and with 
large companies in order to tap complementary resources. 
The vast majority of SMEs, who are not technology-intensive, need to make use 
of readily available research results in order to remain competitive, but lack the 
expertise and resources to do so. The development of the Information Society 
and the take-up of these new opportunities by SMEs must become a key factor 
in addressing this problem. 
Labour market rigidities (See Section I above) 
Insufficient focus on training in SMEs 
A. CONCERTED ACTIONS 
There is a need for exchanging best practice in the field of innovation53, in particular in the 
field of encouraging the creation of new enterprises by researchers and engineers working 
in research centres or universities. Incentives through social security systems are among 
the measures to be examined.54 In co-ordination with the Innovation Policy Fora 
organised under the Innovation Programme, a working party will be set up in the 
framework of the Concerted Action on support measures for enterprises. 
Of particular importance is the access of SMEs to the information society. The forum on 
the information society constitutes a framework for an exchange of best practices with a 
possible feed-back from the Gl pilot projects which are of particular relevance to SMEs. 
In this context Electronic Commerce is of strategic importance given the world-wide 
opportunities it offers to SMEs and the rapid growth of this type of commercial activity 
(20% in five years time). Key issues are, in particular, user-friendly, cheap, secure and 
53 Commission Green Paper on Innovation, COM(95) 688 final of 20.12.95. 
54 Another idea suggested in a 1996 Report submitted by the Committee on Enterprise Creation 
established by the Danish Ministry of Economic Affairs is the putting into place of special fellow­
ships for PhD students who want to carry out their research work through the setting up of an 
enterprise (p.231 of the Report). The same Committee also suggests to create a core of "innovation 
scouts" tracking research results with a potential of being transformed into marketable products and 
services (p.226 of the Report). 
16 
multilingual information services (content industries) and EDI facilities; the involvement 
of intermediaries for disseminating best practices and providing training and advice; legal 
and financial issues. 
The importance of adapting training programmes to the needs of SMEs and to introduce 
incentives for SMEs to invest in training has been underlined in the joint Council and 
Commission report on employment and will be part of the follow-up procedure 
concerning the five priorities defined at the Essen European Council. SME organisations 
will be involved in this process. 
B. COMMUNITY CONTRIBUTIONS 
A number of Community measures have already been taken to enhance SME's 
competitiveness, in particular by improving their access to research, innovation, 
information technologies and training. Among these measures the Euro-Info-Centre 
network (EICs), the European Business and Innovation Centres (EBICs), the European 
Regional Development Fund (ERDF), the European Social Fund (ESF), the EAGGF-
Guidance section, the LEONARDO programme and the Fourth Framework Programme 
on R&TD have to be mentioned in the first place. New measures will in particular include 
a Commission Recommendation addressed to Member States on ways to increase the 
share of SMEs in Community policies and programmes.55 
1. Industrial competitiveness 
In March 1995 a Commission Communication to the Council and European Parliament 
proposed an Action Programme and time table to implement measures under an industrial 
competitiveness policy for the European Union. This was accompanied by a Proposal for 
a Council Decision.56 
The Action Programme takes account of the subsidiarity principle and includes measures 
by the Commission to be carried out in close coordination or collaboration with Member 
States and/or business organisations. These measures concern: 
• the need to modernise the role of public authorities and to continue work in respect 
of streamlining and making procedures more transparent; 
• to promote intangible investment (vocational training, organisation of work, new 
technologies, and quality.); 
• to develop industrial cooperation; 
• to ensure fair competition both in internal and external markets. 
The Commission has sent recently a communication to the Council and to the European 
Parliament on "An Industrial Competitiveness Policy for the European Chemical Industry: 
a Model", which seeks to identify the industry's main challenges and needs, and to define a 
55 See the Commission Proposal for a Council Decision on a Third Multiannual SME Programme, 
Section II. A. 1 of the Explanatory Memorandum. 
56 COM(95) 87 final of 30 March 1995. 
17 
set of activities to enhance its competitiveness. Within the actions to be developed by the 
Commission, industry and/or the Member States, and which stem from the four priority 
areas of the overall Industrial Competitiveness Communication, are measures to improve 
and simplify the legislative framework. These actions will concentrate on the 
consolidation, the updating and/or the simplification of the regulatory framework for 
chemical substances and preparations. This will include the codification of the Directives 
on fertilisers, on limitations for placing on the market, and on detergents; the reshaping of 
the Directive on preparations; and the simplification of procedures for the notification of 
new chemicals, especially for SMEs. 
2. Innovation and R&TD 
In addition to specific pilot actions based on the Third Multiannual SME Programme and 
without amending the master plan provided by the Fourth R&TD framework programme, 
the following actions will be developed to help SMEs innovate, in particular by facilitating 
their access to Community R&TD Programmes and encouraging market oriented 
transnational technological development. 
A better access of SMEs to Community R&TD Programmes requires better information 
and promotion of these programmes. To achieve this objective the Commission will 
ensure a better targeting of the promotion of Community R&TD programmes towards 
specific groups of SMEs. This will involve organising strategic technology audits for 
SMEs, decentralised but co-ordinated at Community level, in order to encourage SMEs to 
make research proposals. The expertise gathered by the EUROMANAGEMENT pilot 
projects under the Multiannual SME programme will be exploited on a permanent basis by 
the CRAFT and Innovation Relay Centres networks of the Community R&TD policy. 
These pilots could also serve as a model for the Member States, whereby it will be 
possible to work towards better co-ordination of national and Community work in the 
field of information and advisory services, while at the same time asking the Member 
States to add " a transnational dimension" to the measures they adopt at national or 
regional level to assist SMEs. In addition to encouraging these technology audits, the 
Commission will consolidate the existing means available for seeking R&TD partners by 
co-ordinating the activities of the various networks (INNOVATION, CRAFT, BC-NET 
and EICs as first-stop-shops) and the use of on-line tools such as CORDIS or ARCADE. 
For ensuring a better access of SMEs to Community R&TD Programmes it is also 
necessary to further improve the selection and management procedures of Community 
R&TD programmes. Key measures will relate to the transparency of the selection 
process,57 ensuring that SME experts are properly represented on the evaluation 
committees,58 informing systematically the coordinators of the projects submitted on the 
results of evaluations,59 reducing the impact of long delays in decisions, reducing late 
payment problems,60 ensuring a proper targeting of SMEs,61 and promoting the 
involvement of SMEs as subcontractors in the research/industry task forces.62 
57 For instance, since the beginning of the Fourth Framework Programme the information packages 
indicate how the "innovative character" is defined and give the evaluation criteria used to categorise 
proposals. 
58 in particular those from technology centres working with SMEs. 
59 to allow unsuccessful SMEs to understand how to improve proposals in the future. 
60 in particular by introducing a specific reference in the standard research contract on the maximum 
payment terms for subcontractors of Community funded R&TD projects in order to avoid lengthy 
Special consideration will be given to the development of new instruments supporting 
market oriented transnational technological development. This should address the fact that 
the majority of European SMEs do not carry out long term research and tend to combine 
existing technologies to develop new applications with a short to medium term 
perspective. Progress has been made in facilitating access by SMEs to Community 
research and development programmes through the Technology Stimulation Measures for 
SMEs. However the R&TD proposals still need to remain pre-competitive,63 while there 
is a need for fostering short term development work by SMEs close to the stage of 
marketable products or services. Accordingly, incentives should be given through the 
Community Innovation Programme or through national or regional innovation agencies 
aimed at supporting transnational projects of this kind including the non-national part of 
the work. In view of the very competitive nature of this kind of project, grants might not 
always appear to be the best way of financing. 
In order to test the feasibility of a specific technological development initiative for a wider 
population of SMEs which could later be introduced into the Community's Fifth R&TD 
Framework Programme (Innovation), the Commission proposes to launch an experimental 
pilot action into ways and means to provide alternative and novel forms of finance for this 
kind of R&TD effort. Given the very competitive nature of such research, the Commission 
intends to test the feasibility of a support mechanism for initiatives jointly undertaken by 
SMEs of different Member States, which would take the form of reimbursable advances, 
or risk-sharing mechanisms with national agencies combining financial and technological 
expertise.64 Actions in this area will be proposed under the Community's Fourth 
framework programme for R&TD and will have to comply or be coherent with the 
principles set out in Articles 92 to 94 of the Treaty and all relevant secondary legislation. 
3. Access to the Information Society 
An essential factor in competitiveness will be the continued use of information technology 
by SMEs. The Information Society programme of the Community therefore places great 
emphasis on supporting SMEs in accessing and using these new applications. Within the 
framework of the Information Society Action Plan the Commission will develop certain 
actions: 
delays in the payment by project leaders. The Commission will also speed up its own payment 
delays. ( See the Commission's 1995 Recommendation on late payment, OJ N° L 127 of 10.6.1995, 
p. 19andOJN°C 144, 10.6.1995, p. 3). 
61 This has been done since the beginning of the Fourth Framework Programme by ensuring the 
consistent application of the criterion of independence in the statistical accounting of SMEs in the 
Community R&TD programmes. 
62 in particular during the "downstream" phases of the projects (creation of prototypes, field tests, 
demonstration etc.), so that they can benefit from the transfer of knowledge and increase their 
technical know-how. 
63 i.e. to require further development work after the end of the project. 
64 Green Paper on Innovation, COM(95) 688 final. 
19 
Having regard to the difficulty of identifying the various needs of SMEs and to avoid 
developing assistance initiatives based on technologies rather than on needs, the 
Commission proposes to launch a pilot action to ascertain the priorities of SMEs and on 
the obstacles hampering the use by SMEs of information technologies. This pilot 
programme will be developed in close co-ordination with Commission efforts to mobilise 
the different groups of Information and Communication Technology (ICT) users. In 
addition, the Commission will initiate studies to assess the technical, economic and social 
issues for SMEs raised by the transition to the Information Society. 
One of the possible benefits of information and communications technology lies in the 
possible networking or clustering of initiatives of SMEs independent of their physical 
proximity. A pilot action should enable the Community to evaluate the economic benefits 
which could be derived from distance-networking by SMEs (e.g. through exchange 
agreements, common specifications for products and services and sharing of resources). 
Enterprises with experience in information and communications technology (for instance, 
in technology parks) could set the example. This pilot programme will be set up in close 
co-ordination with complementary Commission actions in this field, in particular by 
building upon the experience of various on-going G-7 Information Society projects. 
The Commission will also encourage the promotion of the results of successful pilot 
actions and the dissemination of best practice in this field, in particular with the help of 
business intermediaries (e.g. EICs, Chambers of Commerce, SME organisations, 
Innovation Relay Centres) and through the organisation and follow-up of specific fora. 
Closer co-ordination with relevant actions outside the European Union will also be 
sought. 
In addition to the implementation of its action programme on the Information Society, the 
Commission will also encourage Member Stales, in the course of assessment of the 
activities of the Structural Funds in 1997, to give priority in the different operational 
programmes to helping SMEs to have a better access to the Information Society. In the 
framework of the new Objective 2 (1997-1999) Programme, a particular emphasis will be 
put on practical Information Technology applications and services proven to be effective 
for employment and business creation and development. Appropriate measures include 
awareness and training actions for SMEs, diffusion of best practices, telematics-based co­
operation networks between enterprises and improved information services. The 
Commission has also decided that the reserve for the Community Initiative will reinforce 
ADAPT65 with 162 MECU through a complementary set of actions dealing with the 
information society (ADAPT-BIS). 
The Trans-European Networks for telecommunication will also provide specific support 
for SMEs particularly by stimulating the development of cross-border generic services66 
65 ADAPT is a trans-national Community Initiative specifically designed to help the labour force 
respond to the changing needs of the labour market. 
66 i.e. interactive multimedia services networks which include the access to databases, e-mail and file 
transfer and video-conferencing. 
20 
which are easily accessible, affordable and compatible. Transnational consortia of telecom 
operators and intermediaries (such as EICs and BC-NET) will contribute to the 
development of the Information Society by offering support and electronic services to 
SMEs and to the encouragement of new forms of work such as teleworking. 
4. Vocational, management and research training for SMEs 
The contribution of SMEs to employment and growth must be maximised by encouraging 
them to invest in training67. In this area European SME organisations highlighted that the 
share of SMEs (and their employees) in European vocational and management training 
programmes tends to be relatively low. 
The Commission's White Paper on Education and Training proposes a range of support 
measures at European level, in particular with a view to bringing schools and businesses 
closer together and in order to achieve equal treatment between capital investment and 
investment in training.68 
The Commission will ensure that Community support in the area of vocational and 
management training better targets SMEs and the craft sector, in particular start-ups, and 
provides them with training adapted to their needs. Community support for SMEs is 
currently provided through the European Social Fund (ESF), the ADAPT Community 
Initiative, the LEONARDO Programme and the Training and Mobility of Researchers 
Programme69. The Third Multiannual SME Programme proposes complementary pilot 
projects helping to identify novel approaches in this field. 
There should be a major focus on training measures to support SMEs aimed at supporting 
the pre-start-up phase of new SMEs, which requires close counselling in this critical stage. 
The development of women entrepreneurs needs special attention. This can be achieved 
both within the existing measures in the programmes already adopted and through new 
actions under the reinforced ADAPT (ADAPT-BIS) and Employment-NOW Initiatives. 
The association of SMEs or SME organisations in the monitoring committees of these 
programmes will help to take into account these priorities. Beside this, SMEs and SME 
organisations will be encouraged to present projects within the calls for proposals under 
the LEONARDO programme aimed at encouraging training during the start-up phase as 
well as encouraging women entrepreneurship. 
5. Adapting to environmental and energy saving requirements 
A review of the Fifth Environmental Action Programme points to the need for the 
situation of SMEs to be specifically taken into account in relation to the measures that 
ensure the integration of the environment into other policy areas, and in the process of 
moving towards sustainable development. Studies have shown that SMEs are less aware 
of environmental regulations than large companies and have less access to information 
about the availability and costs of environmental technologies and services. The 
Commission will therefore encourage and support initiatives in the following respects: 
67 Single Report from the Council and the Commission on Employment, SI(95) 1000 of 16.12.95, part 
B, Annex 2, p. 15. 
68 White Paper on Education and Training, COM(95) 590 final of 29.11.1995. 
69 Council Decision of 15 December 1994 on a specific programme for R&TD, including 
demonstration, in the field of training and mobility of researchers (1994-1998). 
21 
• integration of avoidance, processing and waste management in production processes; 
• review the Environmental Management and Audit Schemes (EMAS) and the further 
development of eco-management systems for SMEs; 
• introduction of clean technologies taking into account the specific problems of SMEs, 
particularly in respect of financial and technical obstacles;70 
• facilitate the development of eco-businesses and the potential of job creation; 
• better information for SMEs on environmental issues and environmental awareness, as 
well as for training and technical support.71 
The new THERMIE Programme (1995-1998) with a budget of 500 MECU covers 
financial support for projects implementing innovative energy technologies and 
complementary activities, including the dissemination of energy technologies on the 
market and the technological stimulation of SMEs. SMEs will be specifically facilitated 
and encouraged to participate in this Programme with assistance to identify their needs, 
including to find cooperation partners and in the training of staff in new energy 
technologies. The THERMIE Programme will be complemented by a new SAVE II 
Programme (1996-2000) concerning the promotion of energy efficiency in the European 
Union.72 The latter Programme includes financial support for non-technological pilot 
projects aiming at stimulating energy efficiency in industry and commerce which will in 
particular benefit SMEs. 
In addition, the Community "Growth and Environment" pilot project is geared towards 
enterprises investing in environmental improvements and related activities such as energy 
savings. Under this Programme, the EIF will provide loan guarantees at reduced rates to 
SMEs which carry out eligible investments 
6. Local development and employment initiatives 
A Commission communication for the Cannes European Council highlighted the 
employment effect of local development and employment initiatives and emphasised the 
need for complementary Community activities. SMEs have a central role in the 
implementation of such initiatives. As a follow-up the Commission Communication of 
October 1995 sets out the strategic guidelines as well as a methodology for the 
implementation of Community activities. These are focused on the specific needs of 
SMEs73 
In addition, the Community Iniatives LEADER and URBAN, which aim at encouraging 
local development in airal and urban areas, contribute to maintaining or setting up SMEs 
in those areas. SMEs, in particular commerce and the craft sector, are often the main 
beneficiaries of these Community initiatives. 
70 Commission Communication of 24.1.1996 on the Action Plan following the Review of the Fifth 
Action Programme. 
71 Proposal for a Third Multiannual Programme for SMEs, COM(96) 98 of 20.3.96. 
72 COM(95) 225 final of 31.05.1995. 
73 OJN°C 265 of 12.10.1995. 
1-) 
V. PROMOTE ENTREPRENEURSHIP AND SUPPORT SPECIAL TARGET 
GROUPS 
The Madrid SME Policy Paper called for a full recognition of the importance of 
encouraging entrepreneurship at all levels by policy makers throughout the Union. The 
primary goal must be to recreate and stimulate a truly entrepreneurial culture, based on 
values such as self-reliance, risk-taking and a sense of personal commitment. This requires 
action to change attitudes, starting from the educational and training systems and covering 
the relationship between the entrepreneur and public administrations, financial institutions 
and large businesses. In addition, actions are required to support special target groups, in 
particular in view of their job creation potential: 
A. CONCERTED ACTIONS 
The Madrid SME Policy Paper emphasised the need to stimulate business culture and 
entrepreneurship at all levels. Particular attention should be given to encouraging an 
entrepreneurial culture in the framework of Member States' education and training 
systems and to stimulating young entrepreneurs.74 The discussion following the 
publication by the Commission of its White paper on education and training75 will form 
the basis for an exchange of best practices in this field. 
A special target group covers the craft and small enterprises which have a particular role 
to play in the generation and maintaining of employment, and this over the whole territory 
of the Union. They are directly responsible for 60 to 80 % of the jobs created over the last 
five years. Taking into account the specific needs of this category of enterprises, Member 
States have developed specific forms of support, which vary considerably from one 
country to the other. In line with the conclusions of the 2nd European Conference for 
Craft and Small enterprises in Berlin the Commission will organise a specific forum in 
order to exchange best practices with regard to such support mechanisms, including their 
institutional environment. 
Another key target group are the enterprises in the field oï commerce and distribution. 
Following the outcome of the discussion of the Green paper on Commerce and 
Distribution, which the Commission plans to publish during 1996, the Commission will 
organize an exchange of best practices on topics particularly sensitive for the development 
of commerce and distribution. This will cover in particular the Information Society and the 
individual problems of commerce in rural and urban areas respectively. 
B. COMMUNITY CONTRIBUTIONS 
The Commission will initiate complementary actions under the Third Multiannual SME 
Programme in view of stimulating entrepreneurship and encouraging the development of 
craft and small enterprises, enterprises in commerce and distribution, women and young 
entrepreneurs. 
74 See e.g. the Prince's Youth Business Trust in the UK. 
75 Commission White Paper on Education and Training, COM(95) 590 final of 29.1 1.95. 
23 
In addition, the Commission will promote entrepreneurship through actions initiated as a 
follow-up to the White Paper on Education and Training. 
The Commission also recently sent a proposal to the Council and to the European 
Parliament on the mutual recognition of qualifications.76 Its purpose is to establish a 
mechanism for the recognition of qualifications relating to professional activities not 
covered by existing Directives. This should in particular benefit craft and small enterprises 
by facilitating their access to the Single Market. 
The actions for women entrepreneurs under the Third Multiannual SME Programme will 
complement the Community actions in the framework of the local employment initiative 
for women (LEI) under the European Social Fund, later reinforced by the Community 
initiative EMPLOYMENT-NOW which supports actions in the field of training for 
women entrepreneurs in SMEs, the creation of local services to support start-ups, co­
operation and networking of local employment initiatives for women and creation of 
independent activities. The Commission will encourage the integration of the same type of 
projects into the operational programmes of the Structural Funds. 
CONCLUSION 
This Communication on a Integrated Programme for SMEs provides a comprehensive 
framework which should facilitate coherence and greater visibility of the total effort in 
favour of SMEs. It demonstrates the wide range of measures being taken with Community 
support, which, coupled with concerted actions taken by Member States, will help the 
mobilisation and further development of SMEs as a major source of job creation. 
The need for effective coordination is essential. The task of bringing greater visibility to 
the strategy and of achieving greater public recognition of the substantial efforts now 
being made in favour of SMEs is closely dependent upon the degree of real integration of 
the individual actions.The exercise of pulling together the different strands of SME Policy 
and the different actions undertaken directly by the Commission services, by the Member 
States or by the organisations representing SMEs delivers important added value to the 
sum of individual measures. 
This Integrated Programme for SMEs is a direct follow-up to the Commission's 
European Confidence Pact for Employment, which aims at full mobilisation of all the 
actors in a comprehensive strategy in the fight against unemployment.77 In line with the 
Florence European Council78 it calls for an integrated approach whereby national, regional 
and local authorities, the social partners and the Community institutions each take 
practical action in favour of growth and employment. 
76 COM(96) 22 final of 8.02.1996. 
77 CSE(96) lof5.6.1996. 
78 Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.2. 

ISSN 0254-1475 
COM(96) 329 final 
DOCUMENTS 
EN 08 
Catalogue number : CB-CO-96-354-EN-C 
ISBN 92-78-06907-8 
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