Communication from the Commission to the Council and the European Parliament - thinking small in an enlarging Europe
Date: 2003-01-21
Institutions: European Commission
Subjects: European charter, economic policy, enlargement of the Union, entrepreneurship, small and medium-sized enterprises, small business

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 21.1.2003
COM(2003) 26 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

THINKING SMALL
IN AN ENLARGING EUROPE

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

THINKING SMALL IN AN ENLARGING EUROPE

The  Lisbon European Council set the objective of making Europe the most competitive and
dynamic knowledge-based economy in the world by 2010. Europe’s competitiveness depends
strongly  on  its  small  businesses,  which  are  a  key  source  of  jobs,  a  breeding  ground  for
business  ideas  and  a  main  driver  for  entrepreneurship.  For  this  reason,  the  Feira  European
Council endorsed the “think small first” principle1 as one way to progress towards the Lisbon
objectives. This message has been reaffirmed in the Commission's 2003 Spring Report to the
Spring European Council, which places particular emphasis on boosting investment, jobs and
growth through knowledge, innovation and business dynamism2.

To  meet  this  challenge  requires  a  better  business  environment  within  the  Internal  Market,
including  for  example  the  lightest  possible  administrative  and  regulatory  burdens  on
businesses and access to finance. It also requires entrepreneurial attitudes that prompt people
to transform  ideas into businesses  and  to  learn  from  failure.  It  also  calls  the  EU  to  develop
more positive attitudes towards entrepreneurial initiatives and risk taking.

To  respond  to  this  challenge,  the  Commission  and  its  services  are  publishing  a  series  of
documents  assessing  progress  in  supporting  Europe's  small  and  medium  sized  enterprises.
These examine whether or not the Union is meeting its commitments and how small business
friendly  is  the  business  environment  that  is  being  created.  This  Communication  acts  as  an
"executive summary" for those reports, highlighting five key messages.

This Communication and these reports:

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– 

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1 

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5

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Report on the Implementation of the European Charter for Small Enterprises3;

Report on the implementation of the European  Charter  for  Small Enterprises  in the
candidate countries to accession to the EU4;

“Creating an entrepreneurial Europe: The activities of the European Union for small
and medium-sized enterprises (SMEs)”5;

“The  SME  Envoy:  an  active  interface  between  the  Commission  and  the  SME
Community”6

This commitment is embodied in the European Charter for Small Enterprises as endorsed by the Heads
of State or Government at the Santa Maria da Feira European Council of 19-20 June 2000 (Annex III of
the conclusions of the Santa Maria da Feira European Council).
“Choosing to grow: Knowledge, innovation and jobs in a cohesive society”, COM(2003) 5, 14.1.2003.
COM (2003)21.of 21 January 2003.
SEC (2003)57.of 21 January 2003.
SEC (2003) 58.of 21 January 2003.
SEC (2003) 60.of 21 January 2003.

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help  to  set  the  scene  for  the  Green  Paper  on  entrepreneurship  launched  the  same  day
examining  the  Union's  overall  approach  to  entrepreneurship  and  the  conditions  needed  to
ensure the capacity of European businesses to grow.

Most  measures  to  improve  the  environment  for  small  businesses  fall  under  national
responsibility.  In  this  context,  much  of  the  Commission's  work  in  this  area  aims  to  help
Member  States  improve  their  performance  through  the  so-called  Open  Method  of  Co-
ordination, which itself responds to a request of the Lisbon European Council.

1. Europe must listen better to small businesses

Small  businesses  represent  the  vast  majority  of  businesses  in  Europe.  This  is  why  Member
States  committed  themselves  to  “think  small  first”.  However,  one  of  the  difficulties  is  that
small businesses and their employees are  not  always  good  at  making  their  concerns  known.
They may feel that they have more pressing concerns than talking to government. As a result,
consultation  of  small  and  medium  sized  enterprises  in  policy  and  law  making  remains  low
across the EU.

The report on the  Implementation of the European Charter for Small Enterprises shows that
some Member States are however leading by example with an array of different channels to
speak out to small businesses. For example, the Small Business Council in the UK organises
hearings with small businesses across the country and represents the voice of small business
to  the  Government.  Its  Chairman  participates  in  ministerial  meetings  and  presents  annual
policy recommendations to the Government. For its part, the Danish  administration consults
over 1 000 representative companies each year on administrative burdens. A new method to
measure  administrative  burdens  was  developed 
in  Sweden  and  Finnish  business
representatives  participate  in  working  groups  drafting  legislation.  Business  organisations  in
countries such as Germany and Austria are regularly consulted on draft legislation.

On  the  other  side  of  the  equation,  several  countries  still  provide  no  opportunities  for  small
businesses  to  express  their  interests  and  concerns.  More  needs  to  be  done  as  a  matter  of
urgency to give small businesses the opportunity to voice their views.

This challenge becomes more explicit within the future enlarged Europe. From the report on
the  implementation  of  the  Charter  in  the  candidate  countries  it  can  be  seen  that  several  of
these countries have still to create means to involve business representatives in the policy and
law-making  process.  Feedback  from  the  business  community  is  a  key  to  ensuring  that  new
measures to foster entrepreneurship are on the right track from the start.

In  addition, business organisations,  in particular  those  representing small and medium  sized
enterprises, also have a role to play in further developing their representation. Their members
should recognise that this is in their interest and support their organisations accordingly.

Listening to small businesses and integrating their concerns into different Community policies
is a major task for the Commission SME Envoy, appointed within the Enterprise Directorate
General  just  over  one  year  ago.  The  SME  Envoy  acts  as  a  facilitator  between  SME
representatives  and  the  Commission  services  seeking  to  ensure  that  SMEs’  needs  are  taken
into  account  in  Community  policies  and  initiatives.  He  can  play  an  important  role  in
increasing  the  awareness  of  SME  issues  inside  the  Commission,  in  fostering  dialogue  with
business organisations and in promoting the “think small first” principle.

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2. Member States step up exchange of good practice

When  it  comes  to  listening  to  small  businesses,  clearly  there  is  scope  for  learning  from
successful practice. This is starting to happen in other areas, as demonstrated in the report on
the  implementation  of  the  Charter.  A  growing  number  of  Member  States  demonstrate  the
influence  of  other  countries’  ideas  in  shaping  their  national  policy  measures.  This  is  real
progress that responds to the conclusions of the Barcelona European Council.

For example, Denmark has developed  a  web  site  to register companies on-line.  This was to
some  extent  inspired  by  the  results  of  an  EU-wide  project.  Sweden  has  created  a  loan
guarantee  scheme  for  SMEs  inspired  by  practices  developed  in  the  Netherlands  and  in
Finland. Belgium has learned from the experience of Denmark, France, the Netherlands  and
Austria in designing its cluster policy7.

The Commission is pushing ahead with this process of learning from good practices, which is
now  starting  to  bear  fruit.  The  candidate  countries  are  also  joining  in.  Some  of  their
innovative measures may provide a source of inspiration to the Member States.

However, while Member States are learning from one another, performance remains uneven
across  the  EU.  For  example,  registering  a  company  on-line  is  already  possible  in  some
Member States8 such as Denmark and Austria, soon in Sweden, and is planned in Spain and
France.  However,  other  Member  States  keep  struggling  with  lengthy  and  complex  start-up
procedures.  Some  Member  States  offer  small  businesses  the  opportunity  to  complete
obligations  on-line,  while  others  are  only  starting  to  make  forms  available  by  electronic
means.

There is a risk that the best may be getting better and the worst performers not progressing.
There is also a clear need for candidate countries to close the gap that separates them from EU
frontrunners.  Efforts  to  exchange  good  practice  must  be  stepped  up.  Only  in  this  way  can
Europe bridge its performance gaps, particularly in the context of an enlarged Europe.

3. Teaching Entrepreneurship: the role of Education and Training

Whether or not to wish to be an entrepreneur is a question to which a fair amount of people in
the EU gives a negative answer. The propensity towards entrepreneurship9 remains relatively
weak  across  the  EU  when  compared  to  the  US.  However,  some  Member  States  such  as
Greece, Portugal, and Spain have a higher propensity towards entrepreneurship than the US,
and  Italy  has  an  equivalent  rate.  In  addition,  people  working  in  small  and  medium  sized
businesses  need  access  to  appropriate  learning  opportunities  to  keep  their  skills  and
competence updated. That is why Member States are increasingly turning their attention to the
promotion  of  entrepreneurship  in  education  and  training,  thus  meeting  the  interest  of
Europeans, many of whom are willing to learn how to start or take over a business.

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These  measures  are  described  in  Member  States’  2002  reports  on  the  Charter,  available  at
http://europa.eu.int/comm/enterprise/enterprise_policy/charter/charter2003.htm.
Source: Member States’ reports on the Charter.
In  2001,  EU  propensity  to  entrepreneurship  (48  %  of  people  would  favour  to  be  self-employed)
remained 11 percentage points below the US propensity (59%). Greece (68 %), Portugal (63 %), and
Spain (60%) have higher propensity rates than the US, and Italy has the same rate (59 %). Source: Flash
Eurobarometer  107  (2001):  Entrepreneurship.  Survey  conducted  on  behalf  of  The  European
Commission, 
Europe
Enterprise 
(http://europa.eu.int/comm/enterprise/enterprise_policy/survey/eurobarometer83.htm).

Directorate-General 

Gallup 

EOS 

by 

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to 

support  entrepreneurial 

The  Charter  report  shows  that  Member  States  such  as  Belgium  are  developing  framework
towards
programmes 
entrepreneurship10. Overall, there is a growing awareness that entrepreneurship is an attitude
and a choice of life that needs to be fostered  and taught from an early  age. Self-motivation,
creativity,  initiative  and  the  ability  to  cope  with  risk  can  be  encouraged  by  progressive
education from an early age.

initiative  and  positive  attitudes 

One year ago, only two Member States were starting to promote entrepreneurial attitudes such
as  initiative  and  motivation  in  primary  schools.  Today  almost  one  third  of  the  Member
States11  are  implementing  initiatives  to  this  end  and  more  is  in  the  pipeline.  Several  new
measures  targeting  secondary  schools  have  been  launched.  For  example,  projects  putting
pupils directly in contact with entrepreneurs, either by taking entrepreneurs to schools, or by
taking pupils to visit enterprises are in place in Ireland, Luxembourg and the UK12. Secondary
school students in some Member States including Greece attend classes on entrepreneurship.
And  at  least  half  the  Member  States  are  helping  secondary  school  students  to  learn  how  to
create  and  develop  a  company:  the  Netherlands  is  particularly  committed  to  this  end13.
Raising  teachers’  entrepreneurial  knowledge  is  also  a  growing  concern  in  several  Member
States’ policies.

All  this  points  Europe  on  to  the  right  track  to  become  more  entrepreneurial.  But  while
progress  is  encouraging,  initiatives  in  education  and  training  will  only  produce  effects  over
the medium- to long-term.

4. Creating an entrepreneurial culture in the candidate countries

For the candidate countries, building an entrepreneurial culture is the main challenge. Beyond
the  implementation  of  the  acquis  communautaire,  the  candidate  countries  need  competitive
enterprises14  and  a  favourable  business  environment  in  order  to  reap  the  benefits  from  the
internal market.

In  the  candidate  countries  in  particular,  fostering  entrepreneurial  attitudes  starts  with
education. The report on the implementation of the Charter in the candidate countries shows
that  there  are  encouraging  signs.  Teaching  entrepreneurship  and  business  skills  has  become
part  of  the  secondary  school  curriculum  in  almost  half  of  the  candidate  countries15.  And
throughout the candidate countries there are a wide variety of training programmes to enhance
business  skills.  Training  programmes  for  small  businesses  in  Estonia  and  Lithuania,  for
example, have been  embedded in a  broader context of lifelong learning.  But  there is a  long
way to go to  provide a  comprehensive  approach to entrepreneurship-related  education at all
levels.

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States’ 

Member 

Source: Belgium’s 2002 report on the Charter.
These countries are Ireland, Sweden, Finland and the UK. Also Norway is carrying out such measures.
See the Report on the Implementation of the European Charter for Small Enterprises, COM (2003) 21.
and 
at
national 
http://europa.eu.int/comm/enterprise/enterprise_policy/charter/charter2003.htm
Students may learn how to create a mini company in Belgium, Germany, Spain, Italy, Luxembourg, the
Netherlands, Austria and Norway.
According  to  a  survey  measuring  the  number  of  people  involved  in  starting  a  business,  Candidate
Countries surveyed do not demonstrate a distinct pattern as a group compared  to  EU  Member  States.
Global Entrepreneurship Monitor, 2002 Executive Report Reynolds, Bygrave, Autio, Cox and Hay.
Entrepreneurship is part of the school curriculum in Poland, Hungary, Latvia, Lithuania and Romania.

available 

reports 

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Public authorities also need a shift in mentality to provide a favourable environment for the
creation, growth and transfer of businesses. In this context, candidate countries are starting to
cut red tape. The administrative costs and time required to set up a new enterprise have been
reduced  in  such  a  way  that  some  candidate  countries16  are  at  the  same  level  as  the  best
European performers. One-stop-shops have been set up to reduce the administrative  burden,
and bankruptcy laws have been improved in several countries.

To  further  reduce  red  tape  for  small  businesses,  some  candidate  countries17  have  begun  to
provide  information  and  services  on  the  Internet.  The  interactive  use  of  electronic
communication tools has been fostered in such a way that entrepreneurs in Slovakia, Malta,
Latvia and Lithuania can submit tax declarations and other official documents electronically.

In  other  areas,  progress  is  less  encouraging.  Access  to  finance  for  SMEs  is  still  difficult,
although many candidate countries use tax instruments efficiently to increase SMEs’ financial
capacity. Lithuania, for example, has introduced a lower basic tax rate for micro enterprises
than  for  larger  companies,  as  well  as  other  concessions  in  form  of  exemptions  and  VAT
reductions18.  Also  innovation  and  technology  potential  are  not  yet  sufficiently  exploited.
Coherent national strategies are still missing or too recent to have had any significant impact.

5. Putting SMEs at the forefront of all Community policies

Because the European economy is SME-driven, almost every Community policy has an SME
dimension. SMEs’ special needs and concerns are incorporated into most Community policies
and programmes, as presented in the report on the activities of the European Union for SMEs.

For example, the Structural Funds are spending some €16 billion19 on SME-targeted projects
in  the  period  2000-2006.  Approximately  one  third  of  this  Community  aid  to  SMEs  is
dedicated  to  advisory  services  and  to  shared  business  services,  such  as  incubators,
networking, and clusters. In addition, this Community aid is triggering large matching support
from national funds.

Also  the  Multi-annual  Programme  for  Enterprise  and  Entrepreneurship  and  in  particular
SMEs20 and its financial instruments, is geared towards improving the business environment
of small and medium sized enterprises.

In  the  candidate  countries,  pre-accession  assistance  has  increasingly  been  channelled  to
support small and medium sized enterprises. This reflects candidate countries’ willingness to
use  available  funds  to  implement  the  European  Charter  for  Small  Enterprises.  After
enlargement,  the  Structural  Funds  should  play  an  important  role  in  fulfilling  the  Charter’s
commitments.

16

17

18

19

20

on 

the 

report 

This is the case of Malta in particular, but also Cyprus, Latvia, Lithuania and Romania.
These include the Czech Republic, Bulgaria, Estonia and Turkey.
Source:  Lithuania’s 
http://europa.eu.int/comm/enterprise/enterprise_policy/enlargement/charter_ccs_2003.htm.
This corresponds to approximately 11% of the total budget of the Structural Funds. Source: “Creating
an entrepreneurial Europe: The activities of the European Union for small and medium-sized enterprises
(SMEs)”, SEC(2003) 58
Council Decision 2000/819/EC of 20 December 2000 on a multiannual programme  for enterprise and
entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005), OJ L
333, 29.12.2000, p. 84.

implementation 

the  Charter, 

available 

of 

at

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SMEs are also an important target for the Sixth Framework Programme for RTD. For 2002-
2006,  nearly  €2,2  billion  have  been  allocated  to  support  SMEs’  research  and  innovation
efforts,  certainly  making  the  Sixth  Framework  Programme  one  of  the  largest  support
instruments in the world for SMEs’ research. SMEs also benefit from the LIFE-Programme,
the financial instrument for the environment, which spent € 28 million in 2002 on projects in
which SMEs are involved, or from the EU Eco-label scheme, where 80 % of the participating
companies are SMEs21.

The SME Envoy also has an important role to play in improving SME access to information
and to EU programmes, and in further developing a horizontal and co-ordinated approach on
SME issues.

The way ahead

The  SME  package  is  part  of  a  wider  policy  approach  targeted  at  progressing  towards  the
Lisbon goals, and feeds into the forthcoming Spring European Council22.

Enterprise Europe may be on the right track, but faster progress is needed to enable the EU to
meet the Lisbon objective of making Europe the most competitive and dynamic knowledge-
based economy in the world, with more and better jobs and greater social cohesion, by 2010.

One key area where progress is needed is in the promotion of entrepreneurship. That is why
the Commission has launched a public debate on how to further improve the entrepreneurship
agenda,  through  its  Green  Paper  on  Entrepreneurship.  Based  on  the  analysis  of  progress  in
Enterprise Europe including the SME package, the Green Paper poses essential questions on
how to produce more entrepreneurs and how to get more European firms to grow.

If  Europe  can  provide  a  constantly  improving  environment  for  its  small  businesses  and
stimulate  and  exploit  its  entrepreneurial  potential,  then  its  future  competitiveness  will  be
much more assured.

21

22 

Source:  “Creating  an  entrepreneurial  Europe:  The  activities  of  the  European  Union  for  small  and
medium-sized enterprises (SMEs)”, SEC(2003) 58
The European Charter for Small Enterprises commits the Commission to report annually to the Spring
European Council.

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