WRITTEN QUESTION E-1348/02

by Concepció Ferrer (PPE-DE) to the Commission

(13 May 2002)

Subject: Actions to encourage venture capital

Venture capital has a major role to play in boosting innovation on the part of businesses in an open and competitive economy.

In this connection, what actions has the Commission taken, and what actions does it intend to take, in order to give the necessary encouragement to venture capital in the EU and promote incentives to enterprise creation, thus stimulating employment?

Answer given by Mr Liikanen on behalf of the Commission

(14 June 2002)

The Commission shares the opinion of the Honourable Member regarding the importance of risk capital for the stimulation of innovation, growth and job creation. In its report on Risk capital: a key to job creation in the European Union of April 1998, the Commission identified the barriers to the development of an efficient risk capital market in Europe and proposed, in the Risk Capital Action Plan (RCAP), a set of measures to help remove these barriers. The Lisbon European Council of March 2000, the Stockholm European Council of March 2001 and the Barcelona European Council of March 2002 requested that the RCAP should be fully implemented by 2003. The third RCAP implementation report(1) was discussed at the Parliament (rapporteur Mr SKINNER) and a resolution was adopted by the Parliament plenary at its April 2002 session.

The strategy proposed by the RCAP to develop the Community risk capital market comprises three main axes: (i) measures to foster market integration; (ii) structural reforms to address regulatory barriers and fiscal constraints; and (iii) measures to promote a culture of entrepreneurship. Responsibility for action in these policy areas is shared to a varying extent between the Community and the Member States. As the third RCAP implementation report highlighted, progress is being made in setting up a proper regulatory framework for the development of the risk capital market. In addition to those actions under the Financial Services Action Plan (FSAP) that are relevant to the implementation of the RCAP, Member States have undertaken a number of reforms at the national level.

These actions to create an environment favourable to creating and sustaining new and innovative businesses are complemented by public funding limited to addressing identifiable market failures.

For instance, the Growth and Employment Initiative (1998-2000) (Council Decision 98/347/EC(2)) and the Multiannual Programme for Enterprise and Entrepreneurship, and in particular for the small and medium-sized enterprises (SMEs) (2001-2005) (Council Decision 2000/819/EC(3)), contained measures to stimulate the supply of risk capital in the Community, the most important of which was the European Technology Facility (ETF) Start-up Facility.

Under ETF Start-up, the European Investment Fund (EIF), which manages the Facility on behalf of the Commission, invests in relevant specialised venture capital funds, particularly in seed funds, smaller funds, funds operating regionally or funds focused on specific sectors or technologies, or venture capital funds financing the exploitation of Research and Technological Development (R & D) results.

The EIF, which became a part of the European Investment Bank (EIB) Group in the year 2000, also invests its own funds and the EIB's funds in venture capital activities. In recent years it has become one of the most important market players in risk capital in the Community. Given the high risk of seed and early stage finance, support comes from the Community budget, whereas the EIF's and EIB's own resources will be used for less risky later stage investments. In addition, the guidelines for 2001-2005 for the European Regional Development Fund (ERDF) allow the co-financing of regional risk capital funds in the assisted areas.

With regard to actions envisaged, in the near future the Commission will present the evaluation of the Growth and Employment Initiative. In October 2002 it will also present its fourth annual implementation report on the RCAP and, before the end of 2002, a report on best practices in the field of Business Angels.

Furthermore, the progressive implementation of the Financial Services Action Plan by 2005 will also help to restore investors' confidence in risk capital markets and should positively influence the supply of risk capital for European businesses by creating deeper pools of liquidity in European Capital markets.

(1) COM(2001) 605 final.

(2) 98/347/EC: Council Decision of 19 May 1998 on measures of financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs) the growth and employment initiative OJ L 155, 29.5.1998.

(3) 2000/819/EC: Council Decision of 20 December 2000 on a multiannual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2002-2005) OJ L 333, 29.12.2000.