European Parliament resolution on the Commission report to the European Parliament and the Council: Growth and Employment Initiative – Measures on financial assistance for innovative and job-creating Small- and Medium sized enterprises (SMEs)  (COM(2001) 399 — C5-0459/2001 — 2001/2183(COS))
Date: 2001-12-11
Institutions: European Parliament
Subjects: EU industrial policy, early-stage capital, employment aid, financial aid, industrial development, small and medium-sized enterprises, start-up, venture capital

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19. Report on financial assistance for innovative and job creating SMEs (2000)

A5-0422/2001

European Parliament resolution on the Commission report to the European Parliament and the
Council: Growth and Employment Initiative , Measures on financial assistance for innovative
and job-creating Small- and Medium-sized enterprises (SMEs) (COM(2001) 399 , C5-0459/2001 ,
2001/2183(COS))

The European Parliament,

(cid:1) having regard to the Commission report (COM(2001) 399 (cid:1) C5-0459/2001),

(cid:1) having regard to its resolution of 16 January 2001 (1) on the communication from the Commission on

the ‘Growth and Employment Initiative (cid:1) as at 31 December 1999’,

(cid:1) having regard to the Council Decision 98/347/EC (2) on the growth and employment initiative,

(cid:1) having regard to Rule 47(1) of its Rules of Procedure,

(cid:1) having regard to the report of the Committee on Employment and Social Affairs and the opinion of

the Committee on Economic and Monetary Affairs (A5-0422/2001),

A. whereas the crucial importance of encouraging the promotion of SMEs in particular, and a regulatory
climate conducive to investment, innovation and entrepreneurship in general, throughout the EU and
candidate countries, was confirmed as a priority at the Lisbon European Council and in the Employ-
ment Guidelines 2001,

B. whereas the Growth and Employment Initiative was set up in 1998 as a multi-annual programme,
stimulated by the decision of the European Parliament to allocate € 420 million for the purpose of this
programme,

C. whereas Parliament, in its resolution of 16 January 2001, clearly requested a statement from the EIB
to the effect that the available funds would not be allocated solely to small- and medium-sized enter-
prises involved in high-technology and knowledge-based industries, but that small craft, trade and
tourist firms and service enterprises, including in the third sector, would also have every opportunity
to benefit from these appropriations,

D. whereas Decision 98/347/EC stated clearly that appropriate arrangements would be made to allow the
Court of Auditors of the European Community to exercise its mission in order to verify the regularity
of payments made,

E. whereas there has been a significant increase in the availability of European venture capital in recent
years, although the European venture capital market still remains significantly behind the USA,
in particular for seed and early stage capital,

F. whereas the majority of capital raised in Europe is not invested in Europe but actually invested in
America, as European investors have shown a preference for the higher rewards available in the USA,
and have recognised that the lighter regulatory climate in North America makes it easier for entre-
preneurs there to flourish by comparison with the EU,

G. whereas the new Multi-Annual Programme (MAP) approved by the Council on 20 December 2000
proposed modifications and extensions to the ETF start-up facility and the SME Guarantee facility,
together with a simplification of the JEV programme,

(1) OJ C 262, 18.9.2001, p. 71.
(2) OJ L 155, 29.5.1998, p. 43.

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H. whereas as at end-year 2000, 31,4 % of overall available venture capital investment within Europe was

invested in high technology companies,

I. whereas the European Investment Bank (EIB) took a controlling interest in the European Investment

Fund (EIF) during early 2000,

J. whereas there has been a low level of activity regarding this initiative during late 1999 and early

2000, a time which appears to correspond to the restructuring period of the EIF,

K. whereas the 1999 Commission Report recorded that the EIF expected the ETF Start-up Facility to have

25-30 venture capital funds from all fifteen Member States,

L. whereas France and Germany account for over half of the take-up of investments in both the ETF

Start-up and the SME Guarantee Facility,

M. whereas the total number of SMEs benefiting from the SME Guarantee facility has surged to 40 778 by

comparison with 7 223 the previous year, and is currently increasing at a rate of 8 000 per quarter,

N. whereas the ETF Start-up facility has recorded an actual increase of 785 jobs in the 71 investee SMEs
that received an investment before the end of 1999 or early 2000, i.e. an average of 11 new jobs per
company, while the SME Guarantee facility is forecasting an increase of 19 084 new jobs within one
year and a further 33 934 within the second year, representing an average of 1,3 new jobs per com-
pany,

O. whereas, in its resolution of 16 January 2001, Parliament asked for subsequent annual Commission

Reports to be made available to Parliament earlier than the end of May the following year,

P. whereas the EIF sends quarterly progress reports to the Commission, but not to Parliament,

1. Welcomes generally the content and analysis within the thorough and more comprehensive 2000
Report, and commends the Commission and the EIF where progress has been made;

2.
Observes that the 2000 Report was not however officially published until mid-July 2001, after the
start of Parliament’s summer recess, even later than the 1999 Report, which Parliament complained was
too late;

3.
Notes that the ETF start-up facility now comprises 10 contracts signed by the EIF, two under process
and a further five approved in principle, altogether covering just eight Member States rather than the
fifteen confidently predicted;

4. Welcomes the extra operational efforts being attempted by the EIF to stimulate activity in the seven
Member States not currently covered by successful ETF start-up proposals;

5. Wishes to see similar efforts being focused on the candidate countries, where appropriate;

6.

Congratulates the EIF on the very significant increase in take-up of the SME guarantee facility;

7.
Seeks fuller information on the impact of the global technology stock-market downturn upon the
specific prospects and valuations of certain of the programme’s final investee SMEs, and the consequent
changes, if any, in investment policy in the year ahead;

8.
Endorses the revisions to the MAP agreed by the Council in December 2000, observes with surprise
that there was no prior discussion with the Parliament about these proposals, and insists that the need for
Parliament to be involved ahead of such future discussions be fully recognised;

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9.
Observes that while 15 % of the SME beneficiaries of the SME Guarantee facility received pre-start
financing in 1999 before their establishment in 2000, all except six of these companies (i.e. 2 269) were in
France and Germany; asks that their success deserves detailed analysis in the next Commission Report;

Notes the new-found confidence in the re-shaped JEV facility, and looks forward to some early

10.
concrete results;

Points out that there has been no mention of any auditing of any programmes being performed,

11.
despite Decision 98/347/EC and despite the specific request of Parliament in the 1999 Report;

12.
Notes with concern that a possible lack of management focus during the period of restructuring, as
predicted in its resolution of 16 January 2001, plus the complete change of the management team may
have led initially to some of the impetus of the programme being lost, and trusts that the re-organisation is
now complete;

Notes that overall some very real progress has been achieved in the second full year of operation,
13.
but gives notice that Parliament expects a substantial further improvement in performance in year three,
not just in terms of projects signed off but particularly in terms of concrete evidence of substantial
employment gains to-date;

14.
Notes the risk that concentration on seed capital and start-ups underestimates other essential ele-
ments of the SME business cycle, i.e. ongoing business development, initial public offering or subsequent
sale, each of which may have an impact on employment growth; asks for an assessment of the needs of
these follow-up phases to be considered;

15.
Notes that, in order to break into the technology market it is particularly difficult for SMEs in this
sector to obtain the necessary finance, and that the abovementioned financial instruments therefore have a
specially important role to play to that end, but that, on the other hand, particular care is needed in the
evaluation of projects; notes in this connection that a number of private risk capital providers have been
too hasty in quoting businesses on the stock exchange on the basis of particular expectations of yield, and
have thus contributed to the fall in the market in this area;

16.
Stresses that financial instruments to promote small and medium-sized business must be in line
with the requirements of such businesses, in other words that they must be geared to the needs of SMEs
in terms of transparent access to the relevant information, to straightforward application, authorisation and
evaluation procedures and to the need for money at short notice, in particular it must possible for SMEs to
find out at an earlier stage whether they have any realistic chance of obtaining support; notes that small
firms which have the potential for support still too often make no progress because (cid:1) owing to lack of
time and staff (cid:1) they are unable to access Community funds; points in this connection to the positive role
played by the Euro-Info-Centres, which could be expanded still further;

Calls on the Commission, through the abovementioned financial instruments, to step up its support

17.
for projects which are most suitable for completion by small and medium-sized enterprises;

Expresses its concern about the excessively narrow concept of providing risk capital and global
18.
loans mainly to SMEs engaging in life sciences, biotechnology, ITC and multimedia; calls on the Commis-
sion, the Council and the EIB to open up the facilities of the Growth and Employment Initiative also to
sustainable high-tech sectors;

19.
Reiterates its call to the Commission, the EIB and the EIF that available funds should not be allo-
cated solely to SMEs involved in high technology and knowledge-based industries, but that small craft,
trade, tourism and service enterprises, including in the third sector, may also have full opportunity to
benefit;

20.
Considers that the proposals for the new own capital rules for credit institutions (Basel II), due to
enter into force in 2005, will lead to a worsening of financing conditions for small and medium-sized
businesses; warns in particular of a likely drop in available risk capital if assessment continues to be on the
basis of historical data which start-ups cannot, of their very nature, provide;

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21.
Notes not only that the raising of capital, whether own or outside capital, is of vital importance to
small and medium-sized enterprises in the preparatory stage and later, but also that bureaucratic pro-
cedures and rules jeopardise the success of these business and thus the creation and securing of jobs;

Calls on the Commission and the EIB to send a clearer message to finance intermediaries and busi-
22.
ness support providers that raising female participation rates is an important part of the European employ-
ment strategy also in the field of supporting start-ups and SMEs;

23.
Stresses, now that the Commission has announced in its SME multi-annual programme (2001-
2005) that it is withdrawing from the SME support programmes, that more scope must be given to
support programmes at national and regional level;

Calls for the quarterly progress reports from the EIF to be made available to the Parliament at the

24.
same time as they are made available to the Commission;

Calls for the Commission to be legally mandated to publish its Report on the year 2001 no later

25.
than the end of May the following year;

Instructs its President to forward this resolution to the Council, the Commission EIF and the Court

26.
of Auditors.