Proposal for a Council Decision on the provision of loan guarantees for investments carried out by SMEs creating employment

(96/C 146/04)

(Text with EEA relevance)

COM(96) 155 final - 96/0107(CNS)

(Submitted by the Commission on 24 April 1996)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 235 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas the European Council, meeting in Brussels on 10 and 11 December 1993, adopted the White Paper on growth, competitiveness and employment, as the basis for action by the Community and its Member States, supporting the development of SMEs as a key element of increased competitiveness in the Community; whereas the White Paper, in particular Chapter 2 thereof, emphasized the importance of SMEs for the competitiveness of European industry; and whereas specific attention has been drawn to the need to improve access to sources of financing and credit;

Whereas the Commission presented a report to the European Council in Madrid on 15 and 16 December 1995, entitled 'SMEs: a dynamic source of employment, growth and competitiveness in the European Union`, in which in Chapter III.D, the Commission put forward a number of concrete action proposals as regards improved access of SMEs to appropriate sources of funding;

Whereas the Presidency Conclusions of the European Council in Madrid referred, in relation to SME policy, to the need to 'improve the financial environment for them by means of better access to capital markets and encourage development of the European Investment Fund function with regard to SMEs`;

Whereas, on 14 June 1993, the Council adopted Decision 93/379/EEC relating to a multiannual programme of Community actions (1); whereas, on 20 March 1996, the Commission adopted a proposal for a third multiannual programme for enterprises, in particular SMEs, in the European Union; and whereas this Decision should be complementary with these programmes, and should constitute part of the integrated programme in favour of SMEs and craftsmanship;

Whereas, on 22 November 1993, the Council adopted a resolution on the reinforcement of the competitiveness of enterprises, notably small and medium-sized enterprises and craftmanship, and the development of employment (2);

Whereas the present initiative should be in compliance with Commission Recommendation (C(96) 261 final);

Whereas bank lending constitutes an important, if not predominant, form of external funding for small and medium-sized enterprises; whereas such enterprises experience particular difficulties when trying to obtain access to sources of loan finance, because of the fact that credit risks are perceived to be higher than for loans granted to larger companies, and because such enterprises are often unable to provide sufficient collateral or other forms of loan security; whereas interest rates charged to such enterprises are generally higher than those applying to larger borrowers; and whereas the particular difficulties of financing innovative and new technology investments should be noted;

Whereas loan guarantees constitute a cost-effective instrument to facilitate access to loans and moreover lower the interest rates applying to these loans; whereas such guarantees should facilitate and stimulate investments by the beneficiary enterprises and should be extended exclusively in those cases where the loans and investments lead to the creation of employment, and whereas both material and immaterial investments should be eligible under the scheme;

Whereas investments with a transnational character deserve special attention in view of the fact that the impediments towards gaining access to sources of loan finance are exacerbated in comparison with other forms of investment;

Whereas the European Investment Fund (EIF) was set up in June 1994 to contribute to the pursuit of Community objectives by stimulating investment in trans-European networks and small and medium-sized enterprises; and whereas the Community has become a member of the Fund by virtue of Council Decision 94/375/EC (1);

Whereas the Fund is empowered to issue loan guarantees according to its statute; and whereas the cost of the guarantee premiums corresponding to these loan guarantees can either be borne by the beneficiary of the loan guarantee, or alternatively by a third party, notably by the Community;

Whereas the payment of the guarantee premium by the Community implies that the loan guarantees are provided at no cost to the final beneficiary, and whereas the credit risks associated with these loan guarantees are not borne by the Community budget, but by the EIF; and whereas a significant leverage effect can be achieved with a limited volume of budgetary resources;

Whereas the EIF has indicated its willingness to participate in the implementation of this Decision;

Whereas the EIF and the Commission will enter into a Cooperation Agreement on the implementation of this Decision, whereas the European Investment Bank (EIB) will be closely involved in the implementation of this Decision; and whereas the loans guaranteed by the EIF will be made available throughout the Community by a network of financial intermediaries;

Whereas the budgetary resources necessary for the payment of the premiums will be paid out directly to the EIF on a special Community account;

Whereas the loan guarantees are to be made available throughout the Community and be implemented as quickly as possible;

Whereas the EC Treaty does not provide powers others than those of Article 235 for the adoption of this Decision,

HAS DECIDED AS FOLLOWS:

Article 1

The Community shall provide subsidies for the purpose of paying the cost of the guarantee premiums linked to loan guarantees extended by the EIF on a volume of ECU 1 000 million of loans, subject to the availability of appropriations written into the Community budget. Only loans for investment projects involving the creation of employment, and extended to small and medium-sized enterprises, shall be eligible. Particular priority shall be given to small enterprises.

The guarantees shall apply during the whole life of the loans and shall in general cover 50 % of the size of the loans. They shall be extended by the EIF under the usual terms and conditions applying to its guarantee operations. For investments with a transnational character, the cover rate may reach up to 75 % of the size of the loans.

Article 2

The scheme shall operate for an initial period of up to 24 months from the date of its adoption. The scheme shall be administered by the EIF on behalf of the Community, exercising the same diligence as for operations carried out from its own resources.

The detailed terms and conditions for implementing this Decision, notably as regards the monitoring of employment creation, shall be laid down in a Cooperation Agreement between the Commission and the EIF.

Article 3

The Commission shall inform the European Parliament and the Council on the implementation of this Decision. The Commission shall, notably on the basis of the information made available by the EIF, and within 18 months at most from the date of its adoption, provide an evaluation on the overall utilization of the scheme and its impact on the creation of employment and on investment, notably for the purpose of assessing possible future action beyond the initial period.

(1) OJ No L 161, 2. 7. 1993, p. 68.

(2) OJ No C 326, 3. 12. 1993, p. 1.

(1) OJ No L 173, 7. 7. 1994, p. 12.