COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT
Date: 2011-11-30
Institutions: European Commission
Subjects: EU programme, administrative formalities, competitiveness, corporate finance, innovation, market access, research and development, small and medium-sized enterprises

EUROPEAN COMMISSION 

Brussels, 30.11.2011 
SEC(2011) 1452 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a regulation of the European Parliament and the Council 

establishing a Programme for the Competitiveness of enterprises and small and 
medium-sized enterprises (2014 to 2020) 

{COM(2011) 834 final} 
{SEC(2011) 1453 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

4. 

4.1. 

4.2. 

Introduction .................................................................................................................. 1 

Procedural issues and consultation of interested parties .............................................. 1 

Identification ................................................................................................................ 1 

Organisation and timing............................................................................................... 1 

Consultation and expertise ........................................................................................... 2 

2.3.1. 
2.3.2. 
2.3.3. 
2.3.4. 
2.3.5. 

EIP evaluations ................................................................................................... 2 
EACI evaluation ................................................................................................. 2 
External studies................................................................................................... 2 
Public consultation.............................................................................................. 2 
Survey on administrative costs ........................................................................... 3 
Scrutiny by the Commission Impact Assessment Board ............................................. 3 

Context ......................................................................................................................... 3 

Problem definition........................................................................................................ 6 

The problems that require action.................................................................................. 7 

Underlying drivers of the problem............................................................................. 10 

4.3.  Who is affected, in what ways and to what extent? ................................................... 13 

4.4. 

4.5. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

6. 

7. 

7.1. 

7.2. 

7.3. 

7.4. 

7.5. 

Foreseen evolution of the problem............................................................................. 14 

EU right to act and added value ................................................................................. 17 

Objectives................................................................................................................... 20 

General policy objectives........................................................................................... 20 

Specific policy objectives .......................................................................................... 20 

Operational policy objectives..................................................................................... 20 

Consistency with other policies and objectives ......................................................... 24 

Policy options............................................................................................................. 26 

Analysis of impacts .................................................................................................... 35 

Impacts - Option 1...................................................................................................... 35 

Impacts - Option 2...................................................................................................... 38 

Impacts - Scenario 3a ................................................................................................. 39 

Impacts - Option 3b.................................................................................................... 42 

Impacts – Option 3c ................................................................................................... 46 

EN 

  EN 

 
 
8. 

8.1. 

8.2. 

8.3. 

8.4. 

9. 

9.1. 

9.2. 

9.3. 

Comparing the options ............................................................................................... 48 

Effectiveness .............................................................................................................. 48 

Efficiency ................................................................................................................... 48 

8.2.1. 
Cost-effectiveness............................................................................................. 49 
8.2.2.  Administrative Costs ........................................................................................ 50 
8.2.3.  Administrative costs for beneficiaries: survey results ...................................... 50 
Coherence................................................................................................................... 51 

Comparing the options according to the three dimensions ........................................ 52 

Monitoring and evaluation ......................................................................................... 54 

Lessons learnt............................................................................................................. 54 

The new monitoring and evaluation system............................................................... 55 

Indicators.................................................................................................................... 56 

EN 

  EN 

 
 
 
1. 

INTRODUCTION 

The  purpose  of  this  Impact  Assessment  (IA)  Report  is  to  assess  the  expected  impacts  of  an 
EU  Competitiveness  and  SME  programme,  as  proposed  by  the  Commission  in  its  MFF 
Communication of 29 June 2011. 

This programme (hereinafter referred to as the “new programme") is intended to build on the 
Entrepreneurship and Innovation Programme (EIP)1 (referred to as the “current programme”) 
which  forms  one  of  the  three  pillars  of  the  Competitiveness  and  Innovation  Framework 
Programme (CIP) under the current MFF.  

With small and medium-sized enterprises (SMEs) as its main target, the CIP provides better 
access  to  finance,  delivers  business  support  services  in  the  regions  and  supports  innovation 
activities  (including  eco-innovation).  It  encourages  a  better  take-up  and  use  of  information 
and communication technologies (ICT) and helps to develop the information society. It also 
promotes the increased use of renewable energies and energy efficiency. 

The  CIP  has  an  overall  budget  of  €  3,621  milli on  and  is  divided  into  three  operational 
programmes.  Each  programme  has  its  specific  objectives,  aimed  at  contributing  to  the 
competitiveness of enterprises and their innovative capacity in their own areas: 

•  The Entrepreneurship and Innovation Programme (EIP, approximately €2100 million)  

•  The Information Communication Technologies Policy Support Programme (ICT-PSP, 

approximately €700 million)  

•  The Intelligent Energy Europe Programme (IEE, approximately €700 million). 

In the preparations for the next multi-annual financial framework (MFF), it was decided that 
the  activities  currently  under  the  EIP  and  regarded  as  successful  would  be  continued  under 
two  new  programmes:    innovation-related  activities  of  the  current  EIP  would  be  brought 
under Horizon 2020, the new framework programme for research and innovation, whereas the 
competitiveness  and  growth  related  activities  of  the  EIP  would  form  a  competitiveness  and 
SME programme.  

2. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  

2.1. 

Identification  

Lead DG: DG ENTR 

2.2. 

Organisation and timing 

Work on the present impact assessment started in May 2010. The following DGs were invited 
to join the interservice impact assessment steering group (IASG): SG,  BUDG, LS,  AIDCO,  
CLIMA,    EAC,    EMPL,    ENV,    ECFIN,    ENER,    INFSO,    MARKT,    MOVE,    REGIO,  
RELEX,    RTD,    TRADE.  The  group  met  five  times  and  representatives  of  the  above  DGs 
were present in these meetings. 

1 

A  list  of  acronyms  and  a  glossary  on  financial  instruments  can  be  found  in  Annexes  1  and  2, 
respectively. 

EN 

1 

  EN 

 
                                                 
 
2.3. 

Consultation and expertise 

2.3.1.  EIP evaluations2 

The Commission has conducted EIP interim and final evaluations (completed April 2009 and 
April 2011) and an interim evaluation of the CIP (March 2010). These evaluations of the EIP 
and  the  CIP  have  shown  that  the  objectives  of  the  programmes  are  relevant  to  and  aligned 
with the strategic aims of EU policies. Despite a limited budget, progress has been visible, in 
particular  concerning  the  most  important  actions  that  address  SMEs.  Interviews  and  other 
evidence  point  to  a  clear  European  value-added.  (More  detailed  information  about  the 
findings and recommendations of the evaluations is provided in Annex 3.) 

2.3.2. 

 EACI evaluation3 

Part of the EIP budget has been delegated to the Executive Agency for Competitiveness and 
Innovation  (EACI).  An  evaluation,  finalised  in  May  2011,  concluded  that  EACI  was 
performing well and was an efficient and effective delivery mechanism for the initiatives for 
which it has operational responsibility. It confirmed that almost 100% of the budget had been 
executed. (A short summary is provided in Annex 4.) 

2.3.3.  External studies 

In July 2010, an external study was commissioned4 to support the preparation of this impact 
assessment  report,  based  on  a  combination  of  desk  research,  extensive  contacts  with 
Commission  services  and  interviews  with  stakeholders  and  experts.  The  final  report  was 
accepted in June 2011. (The executive summary and main report are provided in Annex 5.)  

A separate study was carried out on tourism which provided an evaluation of current tourism-
related initiatives.5 The main conclusion of the study was that, even if Europe is still world’s 
No 1 tourism destination, there remains room for improvement in the visibility of Europe as a 
tourist destination. The final report was accepted in July 2011 and the executive summary is 
annexed to this report (in Annex 6). 

2.3.4.  Public consultation  

Public  consultation  on  a  possible  successor  to  the  CIP  was  launched  as  part  of  the  impact 
assessment process.6 It was addressed to public and private organisations or individuals who 
wished  to  give  their  views,  such  as  enterprises,  business  organisations,  research  and 
innovation support providers and national, regional and public administrations. 

The public consultation process consisted of: 

2 
3 
4 

5 
6 

http://ec.europa.eu/cip/documents/implementation-reports/index_en.htm 
http://ec.europa.eu/cip/files/docs/evaluation-of-eaci-may-2011_en.pdf 
Economisti  Associati  in  collaboration  with  EIM  Business  &  Policy  Research,  The  Evaluation 
Partnership, Centre for Strategy and Evaluation Services, and Centre for European Policy Studies 
By the Centre for European Policy Studies (CEPS). 
http://ec.europa.eu/cip/public_consultation/index_en.htm 

EN 

2 

  EN 

 
 
                                                 
–  an online survey (including a specific survey on financial instruments7), which was open 

from 8 November 2010 to 11 February 2011; 

–  a public conference organised on 25 January 2011;  

–  meetings  with  the  representatives  of  Members  States  in  the  different  CIP  management 

committees; and 

–  a meeting the CIP Strategic Advisory Board on 2 February 2011.  

The  consultation  confirmed  that  many  parts  of  the  current  programme  work  well,  and  that 
there  is  wide  support  for  maintaining  an  EU  programme  targeted  at  supporting  SMEs  and 
creating  a  favourable  business  environment.  Issues  concerning  access  to  finance  for  SMEs 
have also been discussed in the meetings of the SME Finance Forum in September 2010 and 
March 2011. (A more detailed summary of the consultation is provided in Annex 7.) 

2.3.5. 

Survey on administrative costs  

In  June  2011  a  survey  was  conducted  on  the  administrative  costs  incurred  by  entities  that 
received  support  under  the  EIP.  Out  of  795  entities  contacted,  a  total  of  153  organisations 
replied, a response rate of about 19%. The executive summary of the final report is provided 
in Annex 8. 

2.4. 

Scrutiny by the Commission Impact Assessment Board 

The  Impact  Assessment  Board  of  the  European  Commission  assessed  a  draft  version  of  the 
present  impact  assessment  and  issued  its  opinion  on  02/09/2011.  The  Impact  Assessment 
Board  made  several  recommendations  and,  in  the  light  of  the  latter,  the  final  impact 
assessment report has been amended. 

3. 

CONTEXT 

The  need  to  stimulate  the  competitiveness  of  European  business  has  been  emphasized 
repeatedly by the EU over the past decade.8 At the core of the Europe 2020 strategy, which 
sets a new policy agenda aimed at achieving the overriding objective of “smart, sustainable 
and inclusive growth”, lies the belief that the long-term sustainability of Europe's way of life 
depends  on  its  ability  to  provide  its  citizens  with  growing  living  standards  on  a  sustainable 
basis and broad access to jobs.9 

European  competitiveness  policy  is  intended  to  put  into  place  the  institutional  and  policy 
arrangements  that  create  conditions  under  which  businesses  can  grow  in  a  sustainable  way. 
Improved  productivity  is  the  dominant  source  of  sustainable  income  growth,  which  in  turn 
contributes to growing living standards. Competitiveness also depends on companies’ ability 

7 
8 

9  

http://ec.europa.eu/cip/files/docs/public-consultation-annex2-to-final-report_en.pdf 
Competitiveness is defined here as a sustained rise in the standard of living of a nation or region and as 
low a level of involuntary unemployment as possible. Sustainable competitiveness reflects the ability to 
achieve  and  maintain  the  (economic)  competitiveness  of  industry  in  accordance  with  sustainable 
development objectives. EC, European Competitiveness Report, 2010.  
Sternberg and Arndt, The Firm or the Region: What Determines the Innovation Behaviour of European 
Firms?, Economic Geography, Vol. 77, No. 4 (Oct., 2001), pp. 364-382. 

EN 

3 

  EN 

 
                                                 
to  take  full  advantage  of  opportunities  such  as  the  European  Single  Market.10  This  is 
especially  important  for  SMEs,  which  constitute  99%  of  European  businesses,  provide  two 
out of three  private sector jobs and contribute more than half of the total value-added created 
by businesses in the EU. In the past five years, 80% of new jobs in Europe have been created 
by SMEs.11 

Evidence  gathered  by  the  Commission  suggests  that  the  potential  for  competitiveness  and 
entrepreneurship  of  the  European  economy  still  has  to  be  fully  unleashed12,  that  Europe  is 
under-performing compared to the USA and more advanced Asian economies (Japan, South 
Korea)  and  that  its  advance  on  the  BRIC  countries  (Brazil,  Russia,  India  and  China)  is 
gradually shrinking.13 

In response to this long-term trend, the European Parliament and the Council decided in 2006 
to establish the current programme to address key issues affecting the competitiveness of the 
European  economy,  namely,  the  weak  entrepreneurial  spirit  in  Europe,  an  insufficiently- 
friendly business environment, in particular for SMEs, difficulties that SMEs face in getting 
access to finance and sub-optimal exploitation of innovation. 

Background: The EIP pillar of the CIP 

The EIP has six key objectives:  

i 

ii 

to  facilitate  access  to  finance  for  the  start-up  and  growth  of  SMEs  and  encourage 
investment in innovation activities; 

to create an environment favourable to SME cooperation, particularly in the field of cross-
border cooperation;  

iii  to promote all forms of innovation in enterprises;  

iv  to support eco-innovation;  

v 

to promote an entrepreneurship and innovation culture;  

vi  to promote enterprise- and innovation-related economic and administrative reform. 

The recent evaluations of the EIP have highlighted a number of striking successes:   

–       Over  130,000  SMEs  have  so  far  received  loans  thanks  to  the  EIP  guarantee  facility, 
where  the  leverage  ratio  is  currently  around  1:32  (i.e.  for  every  Euro  spent  on  guarantees 
through the EIP, €32 are finally  obtained by the beneficiary). A further 185,000 are expected 
to  benefit  from  this  measure,  a  target  which  has  been  verified  by  the  Court  of  Auditors  as 

10 

11 

12 

13 

Eckehard Rosenbaum, Competitiveness Rankings of European Countries – How Much Do They Tell 
Us?, Intereconomics 2 (2011) 83 
Structural Business Statistics Database (Eurostat) 
http://epp.eurostat.ec.europa.eu/portal/page/portal/european_business/data/database 
EC,  A  rationale  for  action,  accompanying  document  to  the  Communication  Europe  2020  Flagship 
Initiative Innovation Union, COM(2010) 546. 
EC,  EU  and  BRICs:  Challenges  and  opportunities  for  European  competitiveness  and  cooperation, 
Industrial Policy and Economic Reform Papers 13 (2009) 

EN 

4 

  EN 

 
                                                 
“likely  to  be  achieved”.14  Since  each  loan  case  leads  on  average  to  1.2  jobs  per  each  firm 
assisted15, the programme is expected to have generated close to 380 000 jobs. 

–      €1.267 billion of venture capital has been  mobilised for innovative SMEs, resulting in a 
1:6.8 leverage ratio. For example, the 2010 Nobel Prize laureates in physics, Professor Andre 
Geim  and  Dr  Konstantin  Novoselov,  are  part  of  a  UK  venture-backed  team  which  is  partly 
financed by EIP. 

–      The Enterprise Europe Network is providing integrated services to SMEs via more than 
3,000 staff in 600 regional offices.16 The Network helps SMEs to access market information, 
to  find  potential  business  and  technology  partners  and  to  participate  in  the  7th  Framework 
Programme  for  Research  and  technological  Development  (FP7).  It  offers  advice  on  funding 
and  internationalisation  services.  More  than  4,000  cross-border  partnership  agreements 
between companies have already been concluded through the Network in just 30 months and 
15,000 promotion, information, match-making and brokerage events have been organised.  

–       70,000  students  and  pupils  and  1000  teachers  and  professors  of  entrepreneurship  have 
been  beneficiaries  of  nine  projects  in  entrepreneurship  education  co-founded  by  the  EIP  in 
2009  and  2010.  These  projects  will  serve  as  models  for  introducing  novel  methods  of 
entrepreneurship education and speed up its expansion in all Member States. 

–      Studies collecting data, assessing  market performance and the regulatory framework at 
industry level in the single market have identified strengths and weaknesses at industry level 
and  shaped  the  Europe  2020  flagship  Communication  on  a  new  industrial  policy  for  the 
globalisation era. 

–      The European Network of Female Entrepreneurship Ambassadors has campaigned in 22 
Member  States  to  inspire  women  to  set  up  businesses.  101  new  women-led  companies 
resulted from the work of the Ambassadors in the first year alone. 

–      There has been a major reduction in the time taken and the costs involved in starting up 
and running a small enterprise. In 2010 the average time and cost to start up a private limited 
company was 7 days  and   € 399, compared to  12 days and € 485 in 2 007; this reduction is 
partly due to best practice exchanges and benchmarking financed by the EIP. 

–       The  China  Intellectual  Property  Rights  (IPR)  SME  Helpdesk  provides  training  to 
European SMEs on how to protect their intellectual property when doing business in China, as 
well as confidential consultations on individual business problems. It does this over the web, 
by  e-mail  and  telephone  in  both  China  and  Europe.  In  its  first  three  years  it  served  about 
50,000 website users and offered over 400 private consultations. 

The  management  of  over  80%  of  the  programme  in  budgetary  terms  has  benefited  from 
efficiency gains from delegation of responsibility for implementation from the Commission to 
external  agencies  (to  the  European  Investment  Fund  (EIF)  for  financial  instruments  and  the 

14 

15  
16 

European  Court  of Auditors,  Special  report  on  the  effectiveness  of  the Small  and  Medium  Enterprise 
Guarantee facility, No 4, June 2011, http://eca.europa.eu/portal/pls/portal/docs/1/8006724.PDF 
EIP  Final Evaluation, April 2011 
The network's geographical coverage includes EU Member States, candidate countries, future candidate 
countries and other third countries. http://www.enterprise-europe-network.ec.europa.eu/index_en.htm 

EN 

5 

  EN 

 
                                                 
Executive  Agency  for  Competitiveness  and  Innovation  (EACI)  for  the  Enterprise  Europe 
Network,  pilot  and  market  replication  projects,  and  IPR-related  projects).  Both  external 
agencies have been  highly efficient,  examples being the low level of overhead costs for the 
EIF and the short payment times of EACI. (See also Section 8.3.2 below). 

4. 

PROBLEM DEFINITION  

Competitiveness  has  been  put  under  the  spotlight  of  EU  policy-making  in  recent  years 
because of the market, policy and institutional failures that undermine the competitiveness of 
European enterprises at the global level, and in particular SMEs, the main source of economic 
growth  and  job  creation  in  the  EU.  The  ability  of  enterprises  to  adopt  more  sustainable 
processes and products, as well as their capacity to grow through easier access to finance and 
global markets, are key elements of their competitiveness in terms of productivity.17 

Impact of the financial and economic crisis post-2008 

The  economic  environment  for  European  business  has  been  made  more  difficult  by  the 
economic  crisis  from  200818,  which  has  also  had  long-term  consequences  for  the 
competitiveness of European businesses.19 Productivity has been negatively affected by firms 
having to freeze investment projects. This will reduce future productivity by extending the life 
of relatively obsolete equipment and remove the opportunity to improve productivity through 
re-organisation of the production process.  

A  downturn  in  the  business  cycle  has  a  structural  impact  on  access  to  finance.  During 
recessions,  use  of  short-term  debt  increases  while  use  of  long-term  debt  (used  to  finance 
investment) slows down.20 The economic crisis has had an adverse effect on SMEs’ access to 
bank financing.21 For micro-firms, the tightening of bank lending is frequently reported as a 
source of deteriorating access to finance. SMEs have been disproportionally affected by the 
economic  downturn.22  The  most  pressing  problem  facing  Euro-area  SMEs  is  “finding 
customers” (28%), whereas access to finance is the second most important problem (19%).23 
Banks  are  more  risk-averse,  asking  for  higher  risk  margins  and  demanding  more  collateral 
and security.24 

The economic crisis has presented both an opportunity and a challenge for European policy-
makers.  On  the  one  hand,  it  has  made  the  task  of  securing  future  economic  growth  more 
difficult.  On  the  other  hand,  the  downturn  has  spurred  them  to  improve  the  structural 
conditions for competitiveness of European businesses and unlock the potential of growth for 
SMEs,  as  reflected  in  the  endorsement  by  the  European  Council  of  the  EU  Small  Business 

17 
18   

19 
20 

21 

22 

23 
24 

These are further developed below in section 4.2. 
Commission  Communication  “Review  of  the  “Small  Business  Act”  for  Europe,  COM(2011)78  final. 
http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm 
EC, European Competitiveness Report, 2009 p. 5-6 
Michaelas  et  al.  (1999),  "Financial  Policy  And  Capital  Structure  Choice  In  U.K.  SMEs:  Empirical 
Evidence From Company Panel Data", Small Business Economics, 12, 113-130.  
ECB, Survey on the Access to Finance of Small and Medium-sized Enterprises in the EU, September 
2009 and subsequent surveys for the euro area first and second half of 2010 .  
OECD,  ‘The  Impact  of  the  Global  Crisis  on  SME  and  Entrepreneurship  Financing  and  Policy 
Responses’, 2009 
ECB, Survey on the Access to Finances of SMEs, February 2010 
UEAPME, European SME finance Survey/Results, 2009 

EN 

6 

  EN 

 
                                                 
 
 
Act in December 2008 including an action plan and of the Review of the Small Business Act 
in May 2011. 

Against  this  background  the  European  Commission  has  considered  the  options  for  a  new 
programme  for  the  next  multi-annual  financial  framework  that,  building  on  the  experience 
accumulated  with  the  current  programme  and  taking  account  of  the  difficult  economic  and 
financial situation, could contribute to achieving the objectives identified in the Europe 2020 
strategy.  

4.1. 

The problems that require action 

The overarching problem is that the European businesses are losing out on competitiveness on 
a  global  scale25,  due  principally  to  market  failures  which  undermine  the  capacity  of 
enterprises  to  compete  with  their  counterparts  in  other  parts  of  the  world.  European  SMEs 
show  lower  productivity  and  grow  more  slowly  than  their  counterparts  in  the  USA  for 
example, and they are less able to adapt successfully than larger businesses in Europe. 

Aggregate labour productivity tends to be lower for EU SMEs than for large EU firms since 
their  share  of  value-added  is  typically  lower  (45%  in  manufacturing  and  almost  60%  in 
services)  than  their  share  of  employment.  This  size-class  difference  is  partly  due  to  the 
sectoral  distribution  of  small  and  large  enterprises.  Larger  companies  are  more  present  in 
manufacturing,  which  is  capital-intensive,  whereas  smaller  companies  are  predominantly 
active in the service sector, which is more labour-intensive. (This difference does not exist in 
the  US,  where  small  businesses  employ  about  half  of  the  private  sector  work  force  and 
produce about half of private sector output).26 

As  recently  as  in  2009,  firms  cited  lack  of  access  to  finance,    lack  of  incentives  facilitating 
cooperation  between  actors,  difficulties  in  finding  partners,  and  lack  of  knowledge  about 
support  instruments  as  hampering  their  growth.27  Pressing  global  challenges,  such  as 
increased competition from emerging economies have further hampered European  business’ 
development  on  the  global  stage  and  in  key  third  markets.  Against  the  background  of 
globalisation, which is also driving structural changes, some industrial sectors such as tourism 
and consumer goods28 are failing to reap the potential benefits of restructuring.  

Many  of  the  European  businesses'  competitiveness  problems  can  be  classified  under  two 
categories: on the one hand, underlying constraints to sustainable competitiveness and, on the 
other hand, unfriendly conditions for entrepreneurship and growth of SMEs. This intertwined 
challenge can be broken down into a set of structural problems which have been amplified by 
the recent economic crisis: 

25 
26 

27 

28 

ec.europa.eu/enterprise/enterprise_policy/analysis/observatory_en.htm 
Impact  Assessment  on  the  SBA,  SEC(2008)  2101.  See  also  Flash  Eurobarometer  Series  #196, 
Observatory of European SMEs, 2007, available at: 
ec.europa.eu/enterprise/enterprise_policy/analysis/observatory_en.html 
Commission of the European Communities, ‘Making public support for innovation in the EU more 
effective: Lessons learned from a public consultation for action at Community level’, Brussels, 9.9.2009 
SEC(2009)1197 final 
Tourism directly contributes almost 5% of the EU GDP, and its indirect impact on competitiveness and 
sustainability appears substantial. In terms of growth of the EU tourism industry, however, the pace of 
growth  in  Europe  is  significantly  slower  than  in  the  rest  of  the  world.  World  Travel  and  Tourism 
Council, “European Union 2011 Key Facts” (2011) 

EN 

7 

  EN 

 
                                                 
 
 
 
 
•  problematic  access  to  finance  for  SMEs  that  struggle  to  demonstrate  their  credit- 
worthiness and have difficulties in gaining access to risk capital: this has a negative effect 
on  the  level  and  quality  of  new  business  creation.  The  fragmentation  of  the  EU  venture 
capital  (VC)  market  means  that  VC  funds  are  usually  smaller  than  counterparts  in  the 
USA, for example. The contribution of specialist skills, deeper pockets and better links to 
industry  networks  allow  US  funds  to  support  firms  to  grow  more  rapidly.  As  a 
consequence European SMEs are less reliant on equity capital than their US counterpart 
and  many  fast-growing  European  enterprises  look  to  expand  in  the  US  instead  than  in 
Europe.29 Concerning lending to SMEs who applied for a bank loan in 2009 and 2010, on 
average  29%  did  not  get  any  credit  or  got  less  than  they  applied  for.30  Regarding  the 
venture capital markets, there is a long term deficiency related to the level of funding and 
investments partly related to the fragmentation of the EU market.31 

• 

low levels of entrepreneurial firm creation and poor performance: notwithstanding the 
similar  number  of  EU  and  US  firms  founded  each  year,  European  SMEs  have  lower 
productivity  levels  than  their  US  counterparts.32  For  instance,  young  leading  high-tech 
companies are not created as often in Europe as in other regions of the world. Early-stage 
entrepreneurial  activity  in  the  USA  is  higher  than  in  any  of  the  14  EU  countries 
considered  in  the  Global  Entrepreneurship  Monitor.  And  SMEs  are  structurally  weaker 
than bigger firms. About 20% to 40% of entering firms fail within the first two years of 
life, while only 40% to 50% survive beyond the seventh year.33  

•  weak  entrepreneurial  spirit:  according 

the  2009  Eurobarometer  survey  on 
Entrepreneurship,  only  45%  of  European  citizens  would  like  to  be  self-employed.  For 
comparison, in the United States 55% of the population would like to be their own boss 
(and in China 71%). 

to 

•  a  business  environment  not  conducive  to  start-up  and  growth,  characterised  by  
persistent  regulatory  fragmentation  across  Europe  in  some  areas  and  excessive 
administrative burdens in some Member States: this limits economic growth.34 According 
to  different  surveys,  between  70%  and  88%  of  businesses  consider  difficulties  with 
administrative  rules  in  other  EU  Member  States  as  ‘very  important’  or  ‘important’  in 
deciding whether or not to engage in cross-border trade.35  

•  Issues preventing industry specialization and sectoral competitiveness: the erosion of the 
competitive edge of Europe’s economy is also a consequence of its industrial structure, in 
which new enterprises fail to play a significant role in the dynamics of the industry and 

29 

30 
31 

32 
33 

34 
35 

Europe  Innova,  Meeting  the  challenge  of  Europe  2020,  A  report  by  the  Expert  Panel  on  Service 
Innovation in the EU, February 2011 
European Central Bank and European Commission, SME Finance Surveys, 2009-2010 
Communication from the Commission on Removing obstacles to cross-border investments by venture 
capital  funds,  COM(2007)853  final;  the  "Commission  summary  report  on  the  cross-border  venture 
capital in the EU, December 2009":  
http://ec.europa.eu/enterprise/newsroom/cf/itemlongdetail.cfm?item_id=4053&tpa_id=127&lang=en 
McKinsey Global Institute, Global Entrepreneurship Monitor, 2007, 2009. 
European Competitiveness Report 2008, Communication from the Commission, COM(2008) 774 final, 
p.81. 
http://www.consilium.europa.eu/App/NewsRoom/related.aspx?bid=76&grp=19214&lang=EN&id=347 
CSES study, pages 29 and 31 respectively. 

EN 

8 

  EN 

 
                                                 
 
are  unable  to  enter  markets  and  to  subsequently  grow  into  market  leaders.36  Policy 
makers must tackle specific barriers faced by firms in new sectors, such as access to risk 
finance,  reflect  general,  systemic  weaknesses.37  In  particular,  strong  European  sectors 
(such  as  tourism  and  textiles38)  still  need  to  adapt  to  changing  market  conditions, 
including  growing  international  competition,  and  ensure  a  diversified  offer  of  new 
products and services. Concerning tourism, there is a general lack of knowledge outside 
Europe about European tourist destinations and inside the Union about thematic tourism 
products such as cultural and sustainable tourism. Consumer goods sectors such as textile, 
footwear  or  sport  goods  are  characterised  by  strong  predominance  of  small  traditional 
companies39 with a limited capacity to take up the risks and costs of incorporating creative 
business concepts. 

•  These  problems  are  also  linked  to  the  limited  internationalisation  of  SMEs  inside  and 
outside Europe.40 The single market is not always a friendly environment for SMEs. Only 
8%  engage  in  cross-border  activities  on  a  regular  basis  and  only  about  5%  have  set  up 
subsidiaries  or  joint  ventures  abroad.41  The  2010  Monti  Report  recommended  action  in 
order  to  create  a  business  environment  that  is  more  tailored  to  SMEs'  needs  (see  box 
below).42  

Despite the creation of an EU Single Market, doing business across borders in Europe is still 
subject  to  significant  barriers  for  SMEs.  According  to  a  survey  of  nearly  10,000  companies 
across  the  EU27  carried  out  in  Spring  2009,  these  barriers  include  insufficient  access  to 
capital,  lack  of  information,  administrative  burdens  associated  with  launching  cross-border 
activities, especially in view of the fragmentation of the regulatory landscape in Europe.  

Outside  Europe,  there  are  even  lower  levels  of  company  internationalisation  (25%  of  EU 
SMEs  export  directly  outside  national  markets  but  only  13%  export  beyond  the  EU),  partly 
because  of  the  much  greater  policy  and  regulatory  divergence  between  the  EU  and  other 
major  economies.  Only  16%  of  SMEs  are  aware  of  support  programmes 
for 
internationalisation abroad.43  

This  situation  is  a  matter  of  concern  as  internationalisation  plays  an  essential  role  in  the 
creation of new fast-growing businesses at a time when long-term domestic growth prospects 

36 

37 
38 

39  

40 

41 

42 
43 

Cincera M and Veugelers R, Young Leading Innovators and EU’s R&D intensity gap, IPTS Working 
Paper on Corporate R&D and innovation - No. 07/2010 
Veugelers R and Cincera M Europe’s missing Yollies, Breugel Policy Brief 2010/06 
According to the latest issue of the UNWTO World Tourism Barometer, tourist growth was positive in 
all regions of the world with the exception of the Middle East. Some sub-regionsachieved double-digit 
growth:  South  America  (+17%),  South  Asia  (+14%)  and  South-east  Asia  (+10%).  Europe  exceeded 
expectations (+6%) but is still lagging behind. 
The total annual turnover is estimated at €500 b illion with approximately 5 million people, with high 
average female employment.  
European  Commission,  Internationalisation  of  European  SMEs.  Final  Report,  EIM  on  behalf  of 
European Commission, DG Enterprise and Industry (2009) 
A  New  Strategy  for  the  Single  Market,  report  by  Mario  Monti,  May  2010,  p.  42;  "Internalisation  of 
European SMEs", Final report, December 2009, 
ec.europa.eu/enterprise/policies/sme/files/support_measures/internationalisation/internationazlisation_s
me_final_en.pdf 
A New Strategy for the Single Market, report by Mario Monti, May 2010, p. 43 
According to the study conducted by EIM 

EN 

9 

  EN 

 
                                                 
 
are  limited.  The  large  and  positive  impact  of  engaging  in  international  activities  on  SMEs’ 
productivity and competitiveness are well documented.44 Companies with more than 10 years 
of  activity  are  nearly  twice  as  internationally  active  than  the  average,  which  means  that 
companies  at  the  beginning  of  their  life  cycle  are  less  likely  to  take  this  step.  In  2009  only 
2.5% of European SMEs invested abroad, but SMEs involved in international subcontracting 
reported faster employment growth from 2007 to 2008 than non-active SMEs.45 

4.2. 

Underlying drivers of the problem 

The  challenges  facing  European  businesses  in  terms  of  their  economic  growth  and 
competitiveness  can  be  traced  back  to  a  number  of  concurrent  factors,  and  primarily  to  the 
following market, policy and institutional failures: 

•  Information asymmetries are a key determinant of the problems experienced by SMEs in 
accessing finance46, as they reinforce the hesitancy of providers of finance and limit the 
supply of risk financing. Risk-taking rewards are often considered to be insufficient and 
therefore risks are not been taken which would have positive societal effects.47 

•  Transaction  costs  tend  to  magnify  the  impact  of  information  asymmetries  in  financial 
transactions, aggravating the conditions faced by smaller firms. Similar problems occur in 
other contexts, as when small firms need to go through intermediaries when engaging in 
cross-border  activities,  which  often  operate  according  to  different  rules  and  cost 
structures. 

•  Lack  of  policy  coordination  and  networking  reduces  the  benefits  associated  with  the 
dissemination  of  best  practices.  Ineffective  policy  coordination,  often  accompanied  by 
competing  networks  providing  business  services  to  SMEs,  leads  to  duplication  of  effort 
and waste of scarce resources. Lack of coordination hampers the search for the best skills 
and the creation of new business models that exploit these skills and competences across 
the EU27 and beyond. 

•  The sub-optimal situation created by the above factors is amplified by the diversity (and 
sometimes the lack) of entrepreneurship and SME-related policies at Member State level, 
which contribute to the fragmentation of the policy framework in Europe. The result is an 
uneven regulatory landscape with lack of pro-active support (individual encouragement of 

44 

45 

46  
47 

A study for the UK government found a strong positive correlation between being internationally active 
and  reporting  high  turnover  and  employment  growth.  Technopolis,  Drivers,  Barriers,  Benefits  and 
Government Support of UK International Engagement, 2005. 
According to the study conducted by EIM in 2009 and basically confirmed by the more recent study by 
EIM, "Opportunities for the Internationalisation of SMEs",  June 2011: 
- exporters’ employment growth 7% versus non exporters 3%; 
- importers employment growth 8% versus non importers 2%; 
- SMEs both importing and exporting employment growth 10% versus others 3%; 
- SMEs with FDI employment growth 2007-2008 16% versus others 4%. 
OECD Observer, Financing SMEs and entrepreneurs, Policy Brief November 2006 
Binks,  M.R.,  Ennew,  C.T.  &  Reed,  G.V.,  Information  Asymmetries  and  the  Provision  of  Finance  to           
Small  Firms,  International  Small  Business  Journal,  1992,Volume  11,  No  1;  Chan,  Y-S.,  Kanatas,  G, 
Asymmetric Valuations and the Role of Collateral in Loan Agreements, Journal of Money, Credit and 
Banking, 1985,  Volume 17, No 1; Sharpe, S. A., Asymmetric Information, Bank Lending and Implicit 
Contracts : A Stylized Model of Customer Relationships, Journal of Finance, 1990, Volume 45, No 4 

EN 

10 

  EN 

 
                                                 
 
 
 
SMEs  to  use  the  tools  and  services  available)  in  some  Member  States  and  regions, 
especially in the EU12.  

These  problem  drivers  are  closely  linked  to  each  other  and  do  not  allow  EU  companies  to 
perform at their best in terms of competitiveness and sustainability.  

Findings of evaluations and consultations with stakeholders 

The current EIP programme has to a certain extent mitigated the degree to which European 
businesses, and SMEs in particular, are affected by these factors. The EIP final evaluation and 
the public consultation have shown a number of positive developments: 

–  Financial instruments: The final evaluation has shown that the 12 years of EU presence 
in the venture capital market has had a stabilising effect and has kept this market going in 
difficult times. The guarantee facility, too, has proven to be an efficient way of responding 
to  challenging  market  circumstances  in  SME  finance  and  of  developing  guarantee 
instruments and markets across Europe. Since 2007, the loan guarantee facility has helped 
SMEs  to  borrow  over  6  billion  EUR  for  investment  under  more  favourable  conditions. 
According to stakeholders, the financial instruments (both, the risk capital and guarantees 
instrument) are seen as highly relevant and having impressive leverage effect.   

–  According to the EIP final evaluation, the Enterprise Europe Network is well- focused 
on  its  main  objectives  of  promoting  innovation,  business  co-operation  and  cross-border 
trading, but its basic information service is also important for clients. A client survey in 
2009  suggested  that  the  Network  has  been  delivering  its  integrated  services  to  the  high 
satisfaction of its clients with answers to all survey questions being generally positive and 
ranging  between  70%  and  90%.  Satisfaction  rates  are  particularly  high  (80-90%)  for 
general  information  services,  Network  services  SMEs  can  subscribe  to  (such  as 
customised  (automated)  partnership  proposals,  tender  alert  services,  legislation  watch, 
etc.)  and  the  Network's  publications.48  With  its  integration  into  the  business  support 
system  across  Europe  and  the  strength  of  the  personal  links  between  its  members,  the 
Network has become a major policy asset for the EU’s relationship with enterprises and 
has considerable further potential in terms of the engagement of SMEs with the objectives 
and actions of the EIP.  

–  As regards smaller-scale actions, the final evaluation of the EIP found that there are some 
elements which have had a major effect. For example, the action programme for reducing 
administrative  burdens  and  its  follow-on  actions  has  been  effective  in  identifying  and 
following  through  regulatory  simplifications  valued  at  over  €40  billion.  Other  actions 
contributed  to  developments  that  have  significant  support,  such  as  the  measures  that 
support SBA implementation. The public consultation revealed that measures designed to 
promote  entrepreneurship  and  to  improve  the  business  environment  are  supported  but 
stakeholders underline that they should have clear European added-value. 

The evaluations of the current programme have been positive as regards the effectiveness and 
efficiency of the programme, especially regarding the high level of participation of SMEs and 
the promotion of an environment favourable to their competitiveness and job creation. Most 

48  

A summary of the survey results is provided in Annex 9. 

EN 

11 

  EN 

 
                                                 
measures  of  the  current  CIP  work  well,  as  demonstrated  for  instance  by  the  high  level  of 
satisfaction of the clients of the Enterprise Europe Network, which is proposed to be retained 
as  the  main  vehicle  for  reinforcing  interactions  and  synergies  with  other  EU  financial 
programmes. The need for continuity and stability of actions was underlined by stakeholders. 
One of the main messages received from stakeholders at the conference on the future of the 
measures supported by the CIP which took place in Brussels at the end of January 2011 was 
“Don’t fix what is not broken”.  

Furthermore,  statistics  and  reports  from  the  public  consultation49  show  support  for  all 
envisaged activities from well above 80% of respondents. As regards support for to improve 
the framework conditions of the business environment and access to finance scores are even 
higher, above 90%. For the latter, Equity capital (71%), Hybrid instruments (78%) and Loan 
guarantees (71%) are deemed the most relevant financial instruments in terms of promoting 
competitiveness. In light of the lessons learned from the economic downturn and the fragile 
economic  recovery,  any  future  programme  would  retain  the  in-built  flexibility  for  the 
implementation of the current programme to react to changing economic circumstances. The 
possibility  to  react  to  changes  in  market  demand,  for  example  by  shifts  between  the  equity 
and debt facilities of the Financial Instruments under the current programme, will be retained 
in  future.  Also  the  other  fields  of  envisaged  activities  received  broad  support  such  as  the 
provision  of  business  support  services  (85%),  support  to  the  internationalisation  of  SMEs 
(76%)  and  the  exchange  of  best  practices  (73%).  As  not  so  relevant  was  sector-specific 
support  considered  with  around  50%  of  respondents  considering  it  as  very  relevant  or 
relevant.  However,  certain  recommendations  from  the  evaluations  and  from  the  public 
consultation have been taken into account in the design of the new programme such as greater 
focus on SME internationalisation. 

In  2011,  the  European  Court  of  Auditors  issued  a  special  report  on  the  effectiveness  of  the 
SME  guarantee  facility  (SMEG)  with  six  recommendations  to  improve  the  design  of  the 
SMEG. The main recommendation concerned the European added value of the SMEG and is 
considered in the corresponding section of this report (see section 4.5). In addition, a general 
assessment  of  the  monitoring  system  of  the  current  EIP  was  conducted  in  a  recent  IAS 
performance audit. The recommendations of this audit report are considered in the sections on 
monitoring and indicators (see sections 9.2 and 9.3). 

See  Annexes  3,  7  and  11  for  further  details  of  the  evaluations,  consultation  results  and  the 
audit. 

49  

Available under HTTP://EC.EUROPA.EU/CIP/PUBLIC_CONSULTATION/INDEX_EN.HTM 

EN 

12 

  EN 

 
                                                 
Figure 1 

Problem Tree 

4.3.  Who is affected, in what ways and to what extent? 

European firms are the main stakeholders affected by the underlying drivers of the problem to 
which the new programme should respond. SMEs are more affected than larger firms because 
of their characteristics in terms of capital ownership, management and methods of financing, 
which call for tailor-made policy intervention. 

European  SMEs  are  heavily  affected  by  the  following  problems50:  (i)  low  market  stability, 
low levels of capital investment, weak management skills and resistance to advice or change; 
(ii)  lack  of  entrepreneurial  drive,  which  is  mostly  a  consequence  of  non-economic  motives, 
such as ‘the way of life’, living in an attractive area, and/or family ties that drew the owners 
into the occupation in the first instance; (iii) limited business skills, which lead to limitations 
in respect of marketing, delivering quality, price policy, cost control and ability to re-adjust; 
(iv) lack of finance, due to informational asymmetries as well as the problem drivers outlined 
above, which become even more severe in times of financial constraint . 

As SMEs are the main source of new jobs in the EU, their weakness directly affects the labour 
force. Addressing these weaknesses would significantly improve EU employment prospects. 
Many workers would be affected by the new programme, as SMEs are Europe’s main engine 
for employment. In 2010, SMEs accounted for 99.8% of the stock of enterprises, and 67% of 
employment in the non-financial business economy. 30% of total employment is concentrated 
in  micro-enterprises  (10  employees  or  fewer).  Between  2002  and  2008,  employment  in  the 
non-financial  business  economy  has  on  average  increased  by  1.9  million  jobs  annually,  or 

50 

Kristin Hallberg, 'A Market-Oriented Strategy for Small and Medium Scale Enterprises', World Bank, 
2000 

EN 

13 

  EN 

 
 
                                                 
1.5%  a  year.  Over  80%  of  this  employment  growth  has  been  registered  in  SMEs,  which  is 
more  than  the  SMEs’  share  in  total  employment  (67%).  SMEs  have  a  much  higher 
employment  growth  rate  (1.9%  annually)  than  large  enterprises  (0.8%  a  year).  Within  the 
SME-sector (firms with up to 250 employees), the highest growth rate is found in micro and 
small enterprises.51 

Any proposed programme will be horizontal in its nature and will target excellence among all 
businesses  eligible  for  support,  being  open  to  all  economic  actors  and  in  this  sense  non-
discriminatory.  The  same  applies  also  to  the  geographical  distribution  of  beneficiaries.  As 
high-growth SMEs are the main stakeholders of the new programme, it is difficult to predict 
which Member States are going to be direct beneficiaries. However, smaller Member States 
are  likely  to  benefit  proportionally  more  from  any  new  programme,  as  they  have  more 
fragmented business structures. 

4.4. 

Foreseen evolution of the problem 

Given the severity of the consequences of the economic crisis52 and the declared intentions of 
the EU to address it through the Europe 2020 strategy, this Impact Assessment Report takes 
the 'business as usual' as the baseline option. A discontinuation option, will however, also be 
considered. 

Notwithstanding  the  gradual  pace  of  economic  recovery,  the  economic  outlook  in  the  EU 
remains fragile, especially taking into account structural challenges such as high debt levels, 
an  ageing  population,  and  a  shrinking  labour  force.  Over  the  medium  term,  the  economic 
growth is likely to remain subdued in those Member States with specific challenges resulting 
from domestic macroeconomic and structural imbalances accumulated prior to the crisis. The 
aggregate  picture  is  likely  to  mask  differences  in  development,  with  some  countries 
registering  a  solid  rebound  in  activity  while  others  lag  behind.  Emerging  economies  are 
expected to perform strongly thanks to robust domestic demand, trade and commodity price 
developments. Global market competition from developed and emerging economies, such as 
China and India, will further intensify. This will go hand in hand with increased competition 
for scarce resources and rising resource prices, to which SMEs are sensitive.53 

Apart  from  these  macroeconomic  considerations,  other  more  specific  factors  will  affect  the 
policy problem, providing a mixed picture of positive and negative trends: 

•  Regulatory developments will influence the future conditions for SME access to finance. 
On  the  one  hand,  implementation  of  the  Basel  III  rules  on  capital  and  liquidity 

51 

52 

53 

Figures based on Structural Business Statistics Database (Eurostat) 
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Structural_business_statistics_overview 
OECD,  ‘The  Impact  of  the  Global  Crisis  on  SME  and  Entrepreneurship  Financing  and  Policy 
Responses’, 2009 
European Commission, Directorate-General for Economic and Financial Affairs, European Economic  
Forecast, Commission Staff working document, 2010. 

EN 

14 

  EN 

 
                                                 
 
 
requirements  might  lead  to  a  tightening  of  lending  conditions.54  On  the  other  hand,  the 
recently recast Directive on late payments is expected to improve business cash flow.55 

•  Developments in public policy: At Member State level, budgetary difficulties are likely to 
reduce state support for the development of entrepreneurship and SME-friendly policies. 

•  Development  of  smart,  green  jobs,  products  and  services  in  traditional  industries  are 
expected to have strong positive impact on European competitiveness in the future56. High 
demand for sustainable products and services are expected from the implementation of the 
climate and energy strategy across the EU, as well as other environment-related provisions 
derived  from  the  Community  acquis.  The  same  development  is  likely  to  apply  in 
traditionally strong sectors where the EU’s global position is currently being eroded, such 
as tourism or textiles, characterised by a high proportion of SMEs, where high demand for 
personalised,  inclusive  products  and  services  can  be  expected  as  a  result  of  global 
demographic changes and emerging social trends.57 

In the absence of new policy initiatives at the European level to reinforce current measures to 
promote  competitiveness,  entrepreneurship  and  SMEs,  the  market,  institutional  and  policy 
failures  outlined  in  the  preceding  sections  would  persist  and  perhaps  worsen.  More 
specifically:  

•  The  external  study  found  that,  with  reasonable  estimates,  the  SME  financing  gap  would 
concern between 400,000 and 700,000 enterprises giving a static view based on the total 
number  of  23  million  existent  SMEs.  This  is  a  general  indication  of  the  market 
deficiencies but it most likely underestimates them since it does not consider the average 
inflow  per  year  of  1.8  million  start-ups  to  the  EU  market  or  recurrent  financing  needs 
from  the  existent  stock  of  SMEs.58  Significant  numbers  of  SMEs  could  use  funds 
productively  if  they  were  available  but  cannot  obtain  finance  from  the  financial  system:  
59 European SMEs 
total foregone loans are estimated to be between € 40 and € 70 billion.
would  be  deprived  also  of  the  benefit  of  an  improved  trans-European  venture  capital 
market, and the ratio of VC investments to GDP would remain much lower in the EU than 
in the US.60 

54 

55 

56 

57 

58 

59 

60 

Basel Committee on Banking Supervision, Basel III: A global regulatory framework for more resilient 
banks and banking systems - revised version June 2011, http://www.bis.org/publ/bcbs189.htm 
Directive  2011/7/EU  of  the  European  Parliament  and  of  the  Council  of  16  February  2011  recasting 
the legislation on combating late payment in commercial transactions. 
Tukker, Tischner, New Business for Old Europe – Product-Service Development, Competitiveness and 
Sustainability, Greenleaf Publishing (2006) 
US EP, "Green Servicizing" for a More Sustainable US Economy: Key Concepts, tools and analyses to 
inform policy engagement, www.epa.gov/osw/partnerships/stewardship/docs/green-service.pdf 
European  Commission,  European  SMEs  under  pressure,  Annual  on  Small  and  Medium-sized 
Enterprises, 2009 
One fundamental problem in dealing with the SME financing gap is lack of basic information about just how 
big such a gap may be.  Moreover, the definition of an SME varies between financial institutions, some only 
compiling figures by size of loan, not by size of the borrower, and some not keeping regular statistics of SME 
lending at all. OECD, Financing SMEs, 2006. 
Europe’s  venture  capital  investments  as  a  share  of  GDP  are  only  around  25%  of  that  of  the  US. 
Although there is clearly some diversity across European countries, even the European country with the 
greatest  investment  as  a  share  of  GDP  in  2009  (Sweden)  manages  only  half  the  rate  of  the  US.  /…/ 

EN 

15 

  EN 

 
                                                 
 
 
•  The role and effectiveness of national and European business support structures would be 
undermined by national budget cuts, sub-optimal coordination with other EU and national 
initiatives,  and  uncertainties  about  the  role  of  the  private  sector  in  developing  networks 
and facilitating partnerships.  

•  The  EU  is  facing  the  key  challenge  of  ensuring  its  long-term  economic  growth  through 
modernisation  of  traditionally  strong  sectors.  In  such  sectors  as  textiles  or  tourism,  the 
lack  of  EU  support  would  make  it  more  difficult  to  achieve  sustainability  and 
inclusiveness  objectives  by  promoting  more  sustainable  models  of  business  and  more 
efficient use of natural resources. 

•  SMEs’ internationalisation would be promoted by Member States with different intensity, 
and  sometimes  not  at  all,  with  the  risk  of  under-performing  in  fast-growing  emerging 
markets. In particular, Europe’s outstanding potential for SMEs to access global markets 
would not be fully exploited.61 

The  economic  crisis  and  its  consequences  have  demonstrated  that  uncoordinated  national 
policy responses are of limited value, as they do not muster the critical mass to influence the 
performance and growth of European businesses in global markets and they lack consistency. 
Against  this  backdrop,  a  co-ordinated  EU-level  support  to  European  competitiveness  and 
entrepreneurship,  with  a  special  focus  on  SMEs,  could  constitute  a  significant  additional 
contribution  to  the  challenges  that  Member  States  are  facing.  Without  further  action  at  EU 
level,  European  businesses  would  have  even  more  difficulties  to  adapt  in  an  increasingly 
competitive and interconnected global market.  

A  failure  to  address  these  problems  at  European  level,  even  with  limited  resources  that  can 
only have mitigating effects in the event of a major economic downturn, would make it more 
difficult  for  the  European  economy  to  achieve the Union’s Europe 2020 goals. In any case, 
any new programme is supposed to tackle market and regulatory failures which are likely to 
persist  under  any  conceivable  economic  development.  Concerning  access  to  finance,  for 
instance,  there  is  a  well-identified  need  to  support  the  development  of  a  European  cross-
border market for venture capital, inter alia through the provision of initial  funding through 
the EU. These long-term efforts are necessary whatever phase the economy is in due to the 
structural  deficiencies  in  the  EU  as  compared  to  other  economies  such  as  the  US. 
Nonetheless, in order to adapt to changing economic conditions, the new programme will be 
designed  in  such  a  way  as  to  have  enough  in-built  flexibility  for  its  implementation 
arrangements  to  shift  its  strategic  focus  and  operational  measures  to  react  to  the  general 
economic development. 

Such venture capital is not particularly mobile in Europe, meaning that the already limited syndication 
possibilities are reduced still further compared to the US. EIF working paper 2011/09 

61 

A  study  by  EIM  conducted  on  the  opportunities  for  EU  SMEs  in  markets  outside  the  EU,  in  2011, 
highlighted the potential for growth for SMEs in relation to seven key target markets: Brazil, Russia, 
India,  China  (BRIC),  Japan,  South  Korea  and  Ukraine.  In  addition,  five  other  target  markets  were 
considered  (Armenia,  Azerbaijan,  Belarus,  Georgia  and  Moldova)  as  constituting  a  good  example  of 
untapped growth markets for SMEs. 

EN 

16 

  EN 

 
                                                                                                                                                         
 
4.5. 

EU right to act and added value 

The  EU  right  to  act  derives  from  the  Treaty  on  the  functioning  of  the  European  Union, 
particularly  from  Article  173:  EU  action  should  be  aimed  at  “encouraging  an  environment 
favourable  to  initiative  and  to  the  development  of  undertakings  throughout  the  Union, 
particularly  small  and  medium-sized  undertakings.”  Entrepreneurship  and  SME  support 
measures do not constitute an exclusive competence of the EU. The Lisbon Treaty endowed 
the European Union with powers to support, coordinate and complement action by Member 
States in this field.  

In  addition,  in  the  case  of  tourism,  EU  intervention  also  draws  on  Article  195:  “The  Union 
shall  complement  the  action  of  the  Member  States  in  the  tourism  sector,  in  particular  by 
promoting  the  competitiveness  of  Union  undertakings  in  that  sector.”  The  Lisbon  Treaty, 
providing  this  new  legal  basis  in  the  area  of  tourism,  recognises  its  economic  weight  as  a 
sector within the EU62  and the EU value added of policy initiatives in this sector.  

In these areas of competence, the case for action at the EU level relies on five main sources of 
European added value: 

• 

• 

62 

the  benefits  associated  with  the  strengthening  of  the  Single  Market,  by  overcoming 
market  fragmentation  in  areas  such  as  venture  capital  investment,  cross-border  lending 
and  credit  enhancement  as  well  as  informational  and  organizational  constraints  which 
prevent  SMEs  from  taking  advantage  of  the  opportunities  that  the  Single  Market  offers. 
For instance, the main purpose of the financial instruments will be to improve access to 
finance to SMEs in a market segment which is not covered by Member States’ measures, 
which are restricted to investments and support within each country. The focus will be on 
financing  expansion  of  growth-oriented  enterprises  that  are  aiming  at  international 
expansion,  cross-border  activities  and  to  develop  a  cross-border  SME  finance  market. 
Only an EU-level programme can fulfil this role. In this way, the improved design of the 
guarantee facility will also respond to the sixth recommendation of the Court of Auditors’ 
special report. 

the  possibility  of  achieving  significant  demonstration  and  catalytic  effects,  through  the 
dissemination  of  industrial  and  policy  best  practices.  Under  the  current  programme,  the 
best  examples  in  promoting  entrepreneurship  and  SMEs  at  national,  regional  and  local 
level  can  be  selected  for  the  European  Enterprise  Awards  competition.  The  Awards  are 
aimed at rewarding the best measures taken by public authorities. Every year around 400 
projects have competed in the national competitions and around 56 are selected by their 
countries to participate in the European Competition where the European jury selects six 
winners.  From  the  250  national  nominees,  more  than  30  have  won  an  award  and  been 
showcased  across  Europe  as  a  best  practice.  Transferring  skills  and  knowledge  across 
frontiers  contributes    to  align  Member  States'  policies,  create  new  business  partnerships 
and  reduce  the  gap  between  European  economies.  European  national  and  local 
administrations  have  the  possibility  to  present  their  successful  initiatives  at  the  SBA 
Conference,  organised  every  year  by  the  Commission  and  the  EU  Presidency.  The 

Tourism industry generates more than 5% of the EU GDP, with about 1,8 million enterprises employing 
around 5,2% of the total labour force (approximately 9,7 million jobs). When related sectors are taken 
into account, the estimated contribution of tourism to GDP creation is much higher: tourism indirectly 
generates more than 10% of the European Union's GDP and provides about 12% of the labour force 

EN 

17 

  EN 

 
                                                 
Conference has become the key event for promoting the exchange of good practices in the 
EU  and  beyond.  For  example,  the  latest  SBA  Conference  in  Budapest  attracted  340 
participants  from  EU  and  30  non-MS.  28  good  practices  were  presented  in  the  work-
shops. As regards financial instruments, the role of the EIF facilitates constant exchange 
of  best  practices  in  the  areas  of  both  guarantees  and  venture  capital,  while  the  catalytic 
effect is acknowledged to be particularly high for venture capital. 

• 

the achievement of economies of scale in areas where it would be difficult for individual 
Member States to achieve the required critical mass. For instance, in the field of support to 
SMEs abroad, European added value is created by the bundling of national efforts and, by 
establishing  services  that  would  lack  critical  mass  if  provided  at  national  level  (for 
example,  through  support  to  IPR  enforcement).  The  China  IPR  SMEs  Helpdesk,  funded 
by the current programme, offers advice which would be otherwise unavailable to SMEs 
from  smaller  Member  States.63  Otherwise,  EU  intervention  can  contribute  to  avoid 
duplication of effort, promote cooperation between Member States and coordination with 
relevant non-Member States. In the case of tourism, there is clear added  value in taking 
initiative  at  the  EU-level  especially  in  the  following  areas:  the  consolidation  of  the 
knowledge base in the tourism sector by the means of pan-European surveys and studies 
to  better  understand  the  demand  and  the  supply  side,  without  which  data  comparability 
and  consistency  across  the  EU  would  not  be  achieved64;  the  development  of  joint 
transnational  strategies  for  tourism  promotion  of  Europe  as  home  to  high  quality  and 
sustainable  tourist  destinations65;  as  well  as  the  extension  of  the  tourism  season,  which 
could  be  done  better  with  exchanges  between  different  Member  States  than  by  each 
country individually. 

•  supporting coherence and consistency in national measures through the exchange of best 
practices at European level and benchmarking.66 One of the best examples for the success 
of  benchmarking  exercises  financed  under  the  current  programme  is  the  action  for 
simplification  of  start-up  procedures.  Since  2008,  the  situation  and  progress  country-by-
country  and  year-by-year  has  been  monitored  taking  into  account  three  aspects  of 
simplification  (in  respect  of  which  a  benchmarking  exercise  was  mandated  by  the 
Competitiveness Council): average time, administrative costs and procedures to start-up a 
limited  company.  The  action  consisted  of  semi-annual  expert  meetings  ("the  network  of 
National  Start-up  Co-ordinators")  nominated  by  Member  States.  Its  purpose  was  to 
develop  a  measurement  methodology,  track  progress  and  support  this  progress  with  the 
exchange of good practices and information. Since 2002 registration times have dropped 
by 70% and costs have more than halved. Following the success of this measure, targets 
have been reviewed by the February 2011 Review of the Small Business Act (SBA). 

63 

64 

65 

66 

Over 50,000 different users of the IPR web portal and e-learning services over the first 3 years, with 
over 2 million hits; more than 30 training seminars and interactive workshops run every year, of which 
2/3 performed in Europe, to gather SMEs' concerns. 
Studies/surveys carried out by individual smaller Member States would have less European added-value 
and fail to cover the EU wide scope and might generate a duplication of research already carried out in 
other countries. 
This 
if  done  with  a 
implies  a  higher  added-value  and 
coordinated/complementation approach between the Member States; moreover smaller Member States 
tend  to  have  fewer  resources  for  promotion  of  their  destinations  and  especially  for  the  promotion  of 
transnational tourism products. 
EIM, June 2011 

type  of  measures 

impact 

EN 

18 

  EN 

 
                                                 
• 

the unique expertise acquired by EU institutions:  

• 
This is the case of the EU financial institutions, the European Investment Bank 
(EIB)  and  the  European  Investment  Fund  (EIF),  whose  experience  in  designing  and 
implementing SME-friendly financing schemes is unparalleled. The experience gained 
by the EIF over more than 10 years constitutes a uniquely valuable asset. It has acted 
since  2007  as  an  investor  in  19  CIP-supported  venture  capital  funds,  often  in  a 
cornerstone  role,  leveraging  over  €1.4  billion  of  total  investment  in  growth-oriented 
SMEs.  As  regards  historical  performance,  under  the  first  generation  of  EU  venture 
capital  (the  ETF  Start-up  Facility  under  the  Growth  &  Employment  Initiative  from 
1998-2000) over 98% of the money invested has already been, or should ultimately be, 
paid  back  from  beneficiaries,  including  Skype  (voice-over  IP  telephony),  Vertaris 
(paper recycling) and Solaire Direct (Photovoltaic structures).  

• 
The  Enterprise  Europe  Network  has  achieved  tangible  results  by  putting 
emphasis  on  promoting  the  internationalisation  of  SMEs  (in  the  Internal  Market  and 
beyond) through providing information on EU matters as well as the possibility to feed 
into  the  decision  making  process.  Its  role  is  especially  important  in  overcoming 
information  asymmetries  faced  by  SMEs  and  alleviating  transaction  costs  associated 
with cross-border activities. The value of the Enterprise Europe Network is constituted 
by  the  shared  methodologies,  instruments  and  tools  used  qualified  service  providers 
mandated and (co-) financed by their regional / national authorities. 

Taking into account the above, the subsidiarity principle according to which the EU is entitled 
to act if “the objectives of the proposed action cannot be sufficiently achieved by the Member 
States”, is fully respected. The proposed EU intervention is in line with the Lisbon Treaty, as 
it will specifically target policy failures such as lack of coordination and effective networking 
and market failures such as information asymmetries which can only be tackled at European 
level.  In  particular,  the  activities  related  to  tourism  will  address  the  absence  of  a  well-
consolidated  and  coordinated  tourism  policy,  both  in  terms  of  streamlining  initiatives  at  the 
EU level, and in terms of coordination between the EU and its Member States.67  

None  of  the  measures  considered  under  the  current  or  future  programme  calls  for  the 
substitution  of  national  initiatives  by  an  EU-level  measure  or  binding  decisions  at  the 
European level. On the contrary, EU intervention is designed to make national measures work 
better,  by  giving  a  European  dimension  to  them,  by  better  coordination  and  the  removal  of 
cross-border  obstacles  to  cooperation  either  by  private  actors  or  public  authorities. 
Cooperation  of  national  and  regional  actors  and  structures  is  encouraged  by  means  of 
“horizontal”  networking  rather  than  “vertical”  centralization.  For  instance,  the  SME 
Performance  Review  regularly  provides  information  structured  according  to  the  SBA 
principles and based on core indicators comparing the performance of the individual Member 
States to the EU average. Moreover, the "Good Practices" database provides this information 
on-line  and  contains  activities  taken  by  public  authorities  in  the  27  EU  Member  States  to 
improve the business environment of SMEs. Over 90 good practice examples at national and 
regional level were proposed during the second half of 2010. 

67  

OECD  Centre  for  Entrepreneurship,  SMEs  and  Local  Development.  (2010).  “OECD  Tourism  Trends 
and Policies 2010” 

EN 

19 

  EN 

 
                                                 
EU action also has to be proportional, in other words, efforts and means deployed have to be 
fully  justified  by  the  goals.  In  this  respect,  given  the  challenges  faced  by  the  European 
economy,  the  size  and  scale  of  EU  action  is  expected  to  generate  positive  impacts  across 
Europe  through  crowding-in  and  multiplier  effects.  Because  of  the  current  budgetary 
constraints, any EU-level measures have been carefully selected in order to provide measures 
which can demonstrate EU added value.  

Based on the above analysis, it can be concluded that the proposed EU-level intervention to 
promote entrepreneurship and competitiveness, especially taking into account SMEs needs, is 
fully justified.  

5. 

OBJECTIVES 

The hierarchy of objectives is summarised in Figure 2 below. 

5.1. 

General policy objectives 

The overarching objective of the new programme would be to contribute to the achievement 
of  Europe  2020’s  objective  of  “smart,  sustainable  and  inclusive  growth”.  In  particular,  the 
proposed programme would contribute to the headline target concerning employment (75% of 
the  20-64  year-olds  to  be  employed).  In  order  to  contribute  to  this  overall  objective,  two 
general objectives are envisaged:  

• 

• 

to strengthen the sustainable competitiveness of Europe's industrial base and,  

to encourage entrepreneurship and the creation and growth of SMEs. 

5.2. 

Specific policy objectives  

In view of the above general objectives, the specific objectives to be pursued are: 

(a) 

(b) 

(c) 

(d) 

to  improve  framework  conditions  for  the  competitiveness  and  sustainability  of  EU 
businesses; 

to promote entrepreneurship; 

to improve access to finance; 

to improve access to markets. 

These  objectives  describe  the  results  to  be  achieved  by  the  new  programme,  respect  the 
S.M.A.R.T.  (specific,  measurable,  achievable,  relevant  and 
timed)  criteria  and  are 
accompanied by performance indicators. 

5.3. 

Operational policy objectives 

The specific objectives identified above can be broken down into more operational objectives, 
focusing  on  the  overcoming  of  specific  obstacles  to  growth  and/or  the  creation  of  more 

EN 

20 

  EN 

 
 
conducive  framework  conditions  for  growth,  largely  based  on  the  principles  of  the  Small 
Business Act for Europe (SBA)68: 

i 

to  enhance  the  effectiveness  of  policies  and  institutions  supporting  competitiveness  and 
growth; 

ii 

to foster the competitiveness of targeted EU sectors;  

iii  to facilitate market uptake of sustainable, inclusive products, services and processes; 

iv  to tackle obstacles to SMEs’ potential to grow and create jobs; 

v 

to improve framework conditions for entrepreneurship development; 

vi  to foster entrepreneurial attitudes, mindsets, skills and capabilities;  

vii  to  improve  SMEs’  access  to  venture  capital and  mezzanine  markets  and  strengthen  EU-

wide markets for these instruments; 

viii to  improve  conditions  for  guarantees  and  other  forms  of  risk  sharing  including  cross-

border lending and commercial activities; 

ix  to help SMEs take full advantage of the Single Market; 

x 

to help SMEs to access and develop activities in markets outside the EU; 

xi  to  reduce  differences  between  EU  and  third  country  regulations  for  industrial  products, 

industrial policy and business environments. 

68 

http://ec.europa.eu/enterprise/policies/sme/small-business-act/ 

EN 

21 

  EN 

 
                                                 
Figure 2 

Hierarchy of objectives 

EN 

22 

  EN 

 
 
 
Table  1  summarises  the  relationship  between  the  problems  identified  in  Section  4  and  the 
proposed objectives. 

Table 1 

Logic of Intervention 

Problems 

Objectives 

L
A
R
E
N
E
G

C
I
F
I
C
E
P
S

L
A
N
O
I
T
A
R
E
P
O

I)  Loss  of  competitiveness  of  the 
European economy  

To 

sustainable 
I) 
competitiveness of Europe's industrial base  

strengthen 

the 

II) Lack of entrepreneurship and SME 
creation 

II)  To  encourage  entrepreneurship  and  the 
creation and growth of SMEs 

fragmentation 

(a) 
scenario 

of 

regulatory 

(a)  to  improve  framework  conditions  for 
the  competitiveness  and  sustainability  of 
EU business; 

(b)  lack  of  policy  coordination  and 
ineffective networking 

(b) to promote entrepreneurship; 

(c) 
information 
accessing funding 

asymmetries 

in 

(c) to improve access to finance; 

(d) transaction costs in cross-border 
activities 

(d) to improve access to markets; 

(1) issues in industry specialization and 
competitiveness; 

(1a) to enhance the effectiveness of policies 
and institutions supporting competitiveness 
and growth; 

(1b) 
to  foster 
targeted EU sectors;  

the  competitiveness  of 

(2) limited  investment  and  adoption  of 
(eco)-sustainable 
and 
processes; 

products 

(2)  to  facilitate  market  uptake  of  new 
business  concepts  as  well  as  sustainable, 
inclusive products and processes; 

(3) unfriendly business environment; 

(3)  To  tackle  obstacles  to  SMEs’  potential 
to grow and create jobs; 

(4)  low  levels  of  entrepreneurial  firm 
creation and poor performance; 

(4)  To  improve  framework  conditions  for 
entrepreneurship development; 

(5) weak entrepreneurial spirit;  

to 

(5) 
mindsets, skills and capabilities; 

foster  entrepreneurial  attitudes, 

EN 

23 

  EN 

 
 
 
 
 
(6) problematic access to finance; 

(6a)  to  improve  SMEs’  access  to  venture 
and mezzanine markets and strengthen EU-
wide markets for these instruments; 

(6b)  to  improve  conditions  for  guarantees 
and  other  forms  of  risk-sharing  including 
cross-border 
commercial 
activities; 

lending 

and 

limited 

(7) 
SMEs 

internationalization  of 

(7a)  to  help  SMEs  take  full  advantage  of 
the Single Market; 

(7b)  to  help  SMEs  to  access  and  develop 
activities in markets outside the EU; 

(7c) to reduce differences between EU and 
third  country  regulations  for 
industrial 
products,  industrial  policy  and  business 
environments. 

5.4. 

Consistency with other policies and objectives 

The Commission Communication on the next MFF has underlined that it is essential that the 
specific interests and circumstances of SMEs are taken into account in the design of all EU 
policies  and  funding  programmes.  The  future  financial  framework  will  be  designed  to 
facilitate  the  participation  of  small  businesses in funding  programmes,  by  simplifying  rules, 
reducing the costs of participation, accelerating award procedures and providing a “one-stop 
shop” to make life easier for beneficiaries of EU funding.  

The  Europe  2020  Strategy  identifies  the  enhancement  of  competitiveness  as  an  objective  of 
high importance to be achieved, inter alia, by setting up a “framework for a modern industrial 
policy,  to  support  entrepreneurship,  to  guide  and  help  industry  to  become  fit  to  meet  these 
challenges,  to  promote  the  competitiveness  of  Europe’s  primary,  manufacturing  and  service 
industries and help them seize the opportunities of globalization and of the green economy”.69  

The  relevance  of  SMEs  for  the  Europe  2020  strategy  was  recently  acknowledged  in  the 
Review of the Small Business Act (SBA) of February 2011, endorsed by the Competitiveness 
Council of 30 May 2011, which emphasised three priority areas: smart regulation, access to 
finance and access to markets. Although most initiatives foreseen by the 2008 SBA have been 
launched,  the  Review  states  that  more  must  be  done  to  help  SMEs,  especially  by  reducing 
deficiencies 
in  financial  markets,  promoting  business  cooperation  and  cross-border 
partnership, and sectoral initiatives in line with the Industrial Policy Flagship initiative. 

Due to its importance for the achievement of the Europe 2020 goals, the improvement of the 
business  environment  for  SMEs  is  mentioned  in  six  out  of  seven  Europe  2020  flagship 

69 

Europe 2020 Communication, COM(2010) 2020 final. 

EN 

24 

  EN 

 
 
                                                 
initiatives.70  Of  particular  relevance  for  the  new  programme  is  the  flagship  initiative  “An 
industrial  policy  for  the  globalization  era”  which  outlined  a  new  strategic  approach, 
addressing  European  competitiveness  as  well  as  the  creation  and  growth  of  small  and 
medium-sized enterprises and the promotion of an entrepreneurial culture.71 Its key objectives 
include: 

–  strengthening  the  Single  Market  by  improving  market  surveillance,  information,  partner 
search  and  advice  services  for  SMEs,  creating  a  market  for  business  services,  and 
reinforcing IPR enforcement as well as European standardisation; 

– 

improving  sectoral  policy  frameworks  at  both  EU  and  Member  State  and  regional  level 
particularly  relevant  for  EU  competitiveness,  such  as  tourism  and  user-driven  consumer 
goods, as well as addressing key social challenges; 

–  promoting  entrepreneurship, 

inclusive  growth  by  simplifying 
administrative  requirements  and  procedures  to  start  up  a  business,  promoting  the 
development  of  critical  skills  and  mindsets  for  future  entrepreneurs  and  generating  
entrepreneurship among women and young people; 

job  creation  and 

– 

improving the business environment, in particular by improving access to finance, smart 
regulation, and reinforcing the “Think Small First” Principle; 

–  capitalising  on  globalisation  through  support  services  to  improve    access  to  markets 

outside the EU particularly for SMEs.  

The  proposed  new  programme  will  also  provide  a  tool  which  can  serve  other  policy 
objectives.  The  Enterprise  Europe  Network  will  provide  a  vehicle  for  links  with  other 
programmes and initiatives, in terms of “top-down” diffusion of information, promoting them, 
as well as “bottom-up” collection of feedback from stakeholders. Other Commission services 
are interested in using the Network partners both in Europe and overseas for the delivery of 
parts of their programmes to SMEs: DG RTD wishes  to build the National Contact Points for 
SMEs  into  the  Enterprise  Europe  Network,  DG  CLIMA  is  exploring  how  a  Network-like 
structure  could  contribute  to  making  a  “technology  mechanism”  of  the  Climate  Change 
Convention  (UNFCCC)  accessible  to  European  SMEs,  and  DG  AIDCO  believes  that  a 
Network-type  mechanism  can  deliver  programmes  like  SWITCH  Asia  (encouragement  of 
cleaner production in Asia) more effectively. 

Synergies  with  other  programmes  will  also  be  maximised.  For  example,  the  guarantee 
activities proposed in the new programme will operate alongside guarantee activities funded 
under  the  EU  Structural  Funds.  The  SMEG  successor  will  focus  more  on  guarantees 
supporting  cross-border  and  multi-country  lending,  as  well  as  securitisation,  in  line  with  a 
recommendation  by  the  European  Court  of  Auditors  to  maximize  EU  added  value  in  any 
successor to the SMEG facility.72 This would ensure a high degree of complementarity with 

70  

71 

72 

An Industrial policy for the Globalisation Era, Innovation Union, Youth on the Move, A Digital Agenda 
for Europe, Resource Efficient Europe, An Agenda for new Skills and Jobs. 
Communication from the Commission, An Integrated Industrial Policy for the Globalisation Era Putting 
Competitiveness and Sustainability at Centre Stage, Brussels, COM(2010) 614. 
European Court of Auditors, ibid, page 50. 

EN 

25 

  EN 

 
                                                 
other  EU  programmes,  such  as  JEREMIE,  which  are  focused  on  the  national  and  regional 
levels. 

The  new  programme  would  avoid  overlaps  with  other  programmes.  As  stated  earlier,  the 
programme will not cover actions addressing market failures related to innovation, which will 
be  included  in  the  Horizon  2020  programme.  For  example,  it  is  foreseen  that  Financial 
Instruments  in  Horizon  2020  will  focus  on  financing  research-  and  innovation-driven 
enterprises, in particular clean technologies and life sciences, where the funding is at a sub-
optimal level given the high level of capital required. As a consequence, the new programme 
would  instead  target  growth-oriented  SMEs  in  their  growth  and  internationalisation  phases. 
Also other actions targeting innovative SMEs currently covered by the CIP would in future be 
supported  by  Horizon  2020  so  that  a  clear  distinction  according  to  beneficiaries  will  be 
achieved.  With  this  target  group,  the  new  programme  would  also  avoid  overlaps  with  the 
European  Progress  Microfinance  Facility  (Progress  Microfinance),  as  there  is  no  specific 
microfinance facility in the proposed Financial Instruments. The Progress Microfinance was 
set up as part of the EU response to the crisis with rising unemployment and social exclusion. 
Its  goal  is  increasing  access  to  and  availability  of  microfinance  for  vulnerable  groups, 
especially  in  the  social  economy.  The  same  would  apply  to  its  successor  after  2013,  which 
will be extended to investments in social enterprises.   

For  the  new  programme,  the  responsible  Commission  services  for  activities  to  promote 
entrepreneurship plan to closely coordinate to establish complementary links between all their 
actions.  Already,  unemployed  youth  benefiting  from  the  microfinance  credit  for  starting  an 
enterprise  have  the  opportunity  to  also  participate  in  the  exchanges  programme  for 
entrepreneurs to acquire the necessary entrepreneurial skills. In addition, cooperation has been 
initiated  to  integrate  all  Commission  entrepreneurship  measures  in  order  to  jointly  target 
migrants and senior entrepreneurs and potentially other target groups. 

Careful consideration will also be given to the complementarity of the new programme with 
the  proposed  Partnership  Instrument.  It  will  be  essential  that  the  external  action  of  the 
European  Union  be  complementary  to  the  external  dimension  of  the  internal  agenda  of 
securing sustainable growth and jobs in Europe.  

Finally,  the  proposed  programme  would  be  fully  complementary  with  existing  national 
measures  supporting  SMEs.  For  instance,  the  cross-border  and  multi-country  focus  of  the 
proposed financial instruments would avoid undue interference with public support measures 
which are of a national nature. In particular, the Guarantee Agreements between the EIF and 
participating  financial  intermediaries  provide  that  the  EU  Guarantee  will  not  be  used  to 
substitute  existing  public  support,  thus  ensuring  additionality  in  the  unlikely  case  that  the 
instruments  overlap.  Finally,  if  the  existence  of  an  EU  guarantee  scheme  encourages  the 
development  of  national  schemes  targeting  this  area  or  inter-linkages  between  national 
schemes  in  order  to  mutually  support  SME  cross-border  activities  it  would  in  fact  have 
achieved its objective of enhancing SME credit access with respect to such activities. 

6. 

POLICY OPTIONS  

The scale and nature of the considered options are based on the proposed architecture of the 
post-2013  MFF  as  described  in  the  Commission's  Communication  “A  budget  for  Europe 

EN 

26 

  EN 

 
2020”.73  All  the  options  are  consistent  with  the  proposed  budgetary  allocation.  In  addition, 
however, this report also refers to a hypothetical scenario (3a), based on the analysis provided 
in  the  external  study  concluded  before  June  2011.  The  budgetary  assumptions  of  this  study 
were not consistent with the Commission’s final proposal but the quantitative analysis of the 
study is still relevant to the considered options.  

The different options can be described as business-as-usual, discontinuation and expansion.   

(cid:168)  Option  1  –  Business-as-usual  (baseline),  the  continuation  of  current  EU  support 

activities on their current scale; 

(cid:168)  Option 2 - Discontinuation, in which all the measures envisaged under Option 1 would 

be terminated; 

(cid:168)  Option  3  -  Expansion,  in  which  two  sub-options  and  one  hypothetical  scenario  are 

analysed: 

•  Hypothetical Scenario 3a – Significant budgetary expansion for all components: this 
scenario reflects the ‘preferred’ sub-option identified by the external study. (Although 
assuming a budget that exceeds (sometimes significantly) the budget proposed by the 
Commission  on  29  June,  this  scenario  provides  most  information  on  (quantitative) 
impacts, which is relevant for the assessment of the two sub-options below).  

•  Sub-Option 3b - Modest budgetary expansion for all components: all components 
are  retained  and  their  scale  is  adapted  to  the  total  budget  proposed  for  the 
Competitiveness and SME programme in COM(2011)500.74 

•  Sub-Option  3c  –  Budgetary  expansion  with  focus  on  the  two  main  components: 
the budget is the same as in Option 3b but is concentrated on the financial instruments 
and the Enterprise Europe Network. 

Table  2  below  provides  a  synthetic  presentation  of  the  distribution  of  budgetary  allocation 
among different proposed options and corresponding envisaged measures.  

Table 2  

Summary of Options 

Option #1 

Option #2 

Option #3 

Business as Usual 

Discontinuation of 
EU intervention 

Expansion of EU  intervention 

Measures 

€213 million/year  

€0 million/year  

Option 3B:  €340 million/year 

Option 3C:  €340 million/year  

1 – Activities to 
improve European 
competitiveness 

Improvement of the 
economic and regulatory 
environment through 

Discontinuation of all 
current activities 

Option 3B: Baseline plus launch of 
a range of complementary actions 
in new areas (e.g. Corporate Social 

73 
74 

COM(2011)500 
The  options  are  built  upon  average  yearly  budget  allocations.  In  view  of  the  proposed,  steeply 
increasing profile for the new programme, it is expected that all activities would start at a budget level 
comparable to 2013 and would increase over the life-time of the programme. 

EN 

27 

  EN 

 
 
 
                                                 
2 – Developing 
SME policy and 
promoting SMEs' 
competitiveness 

3 – New business 
concepts for 
sustainable, user-
driven design-
based consumer 
goods 

4 – Tourism 

5 – Activities to 
promote 
Entrepreneurship 

6 – Financial 
instruments 

benchmarking, the 
exchange of best practices 
and sectoral initiatives 
(€11 million/year) 
Implementation of the 
SBA and its Review at 
European and national 
level (e.g. Promotion of 
the "Think Small First" 
principle) (€9 million/year) 
Analysis related to design-
based consumer goods and 
support measures in the 
areas of IPR or e-business 
(€1 million/year) 

Continuation of current 
initiatives in the field of 
tourism co-financed under 
CIP/EIP (e.g. follow-up to 
preparatory actions for 
sustainable tourism: 
EDEN, CALYPSO) (€5 
million/year) 

Encouraging the 
development of 
entrepreneurial skills and 
attitudes, including 
exchange programmes for 
entrepreneurs (€11 
million/year) 

Continuation of support to 
access to finance, mainly 
through provision of 
guarantees to SMEs and 
Venture Capital funds 
targeting firms in the 
growth stages  (€113 
million/year) 

7 – Enterprise 
Europe Network 

Maintain the Network’s 
role and scope as it is (€60 
million/year) 

8 – SME support 
abroad 

Continuation of current 
initiatives (i.e. limited 
financial support to 
selected initiatives such as 
China IPR SME Helpdesk) 
(€2 million/year) 

Responsibility) (€14 million/year); 

Option 3C: Discontinuation of all 
current activities 

Discontinuation of all 
current activities 

Option 3B: Same as Baseline 
option (€9 million/year);  

Discontinuation of all 
current activities 

Discontinuation of all 
current activities 

Discontinuation of all 
current activities 

Discontinuation of all 
direct intervention in 
financial instruments, 
with EU action 
limited to elimination 
of regulatory barriers 
to cross border 
venture capital 

Discontinuation of all 
direct financial 
support to the 
regional Network 
consortia 

Discontinuation of all 
forms of direct 
initiatives 

Option 3C: Discontinuation of all 
current activities 

Option 3B: Use of instruments 
such as “market replication 
projects” in areas where SMEs face 
obstacles to take-up new eco-
sustainable technologies and new 
user-driven business concepts (€ 12 
million/year); 

Option 3C: Discontinuation of all 
current activities 
Scenario 3B: Expand the scope of 
intervention to new activities 
related to sustainability and 
targeting diversification of 
products and services  (€18 
million/year); 

Option 3C: Discontinuation of all 
current activities 
Option 3B: Same as Baseline 
option plus modest expansion of 
activities focused on the increase of 
number of exchanges (€12 
million/year); 

Option 3C: Discontinuation of all 
current activities 
Option 3B: 80% increase in 
resources, relative to Baseline, with  
the same range of instruments 
funding both debt and equity (€200 
million/year); 

Option 3C: Focused expansion of 
activities, reflecting an increase of 
risk sharing finance in venture and 
mezzanine capital (€280 
million/year) 
Option 3B: Same as Baseline 
option (€60 million/year); 

Option 3C: Re-orient the Network 
as an entry point for equity 
financing  (€60 million/year) 
Option 3B: Expansion of the range 
of instruments including: a) 
coordination and information 
dissemination activities; b) 
financial support to existing SME 
help structures in key third 

EN 

28 

  EN 

 
 
markets; c) possible establishment 
of EU support centres where 
appropriate (€12 million/year); 

Option 3C: Discontinuation of all 
forms of direct initiatives 
Option 3B: Expansion of the range 
of instruments including: a) 
industrial and regulatory dialogues 
with third countries; b) business-to-
business dialogues with third 
countries; c) SME industrial policy 
co-operation (€3 million/year); 

Option 3C: Discontinuation of all 
current activities 

Discontinuation of all 
current activities 

9 – International 
industrial 
cooperation 

Continuation of current 
initiatives focused on SME 
and industrial policy co-
operation with third 
countries in the “Near 
Europe” aiming to 
facilitate EU - third 
country convergence of 
industrial policy and 
regulatory frameworks (€1 
million/year) 

Option 1 – Baseline  

Under  this  option,  the  new  programme  would  cover  the  same  competitiveness-  and  SME-
related elements as the EIP is expected to cover in 2013 and would have a budget of about € 
213 million per year. It would include the following elements: 

•  Activities  to  improve  European  Competitiveness,  aimed  at  supporting  coherence  and 
consistency  in  implementation  as  well  as  informed  policy  making  at  European  level, 
would  be  allocated  a  budget  of  €11  million/ year.  They  would  aim  to  improve  the 
economic  and  regulatory  environment  through  benchmarking,  the  exchange  of  best 
practices and sectoral initiatives. 

•  Activities  to  develop  SME  policy  and  promote  SMEs  competitiveness,  aimed  at 
implementing the SBA and its Review at European and national level, would be allocated 
€9 million/year. Priorities would be to promote the use of the “Think small first” principle 
in EU and Member State policy making and to exchange good practices in relation to the 
implementation of the SBA. 

•  Activities targeting specific sectors: 

• 
New  business  concepts  for  sustainable,  user-driven  design-based  consumer 
goods, aimed at getting new business concepts to the market, would receive a budget 
of less than €1 million/year to fund analysis  related to design-based consumer goods 
and support measures in the areas of IPR or e-business; 

• 
Tourism-related  initiatives  co-financed  under  the  EIP,  aimed  at  promoting 
competitiveness  and  sustainable  growth  in  the  EU  tourism  industry,  would  be 
maintained  (€5  million/year),  including  measures  related  to  EDEN  (European 
Destinations  of  Excellence),  CALYPSO  (social  tourism)  and  sustainable  tourism, 
previously implemented as preparatory actions. 

•  Promotion  of  entrepreneurship  aimed  at  fostering  entrepreneurial  attitudes,  mindsets, 
skills and capabilities would be allocated €11 million/year to encourage the development 

EN 

29 

  EN 

 
 
of entrepreneurial skills and attitudes, especially among new entrepreneurs, young people 
and  women.  An  exchange  programme  for  entrepreneurs  would  be  maintained  at  the 
current budgetary level. 

•  Actions in the field of Financial  Instruments aimed at facilitating access to finance for 
SMEs  would  be  allocated  a  budget  of  approximately  €113  million/year  and  would  be 
centred on the provision of guarantees to SMEs and investment in  venture capital funds 
targeting  firms  in  the  growth  stages,  but  not  excluding  others.  On  average,  55%  of  the 
total resources would be allocated to venture capital and mezzanine instruments and 45% 
to loan guarantees, though flexibility should be maintained between the two instruments. 
Depending upon market developments and resources available, investments might also be 
provided to securitization schemes. 

•  Further development of EU level SME support networks: 

• 
The Enterprise Europe Network providing business support services to SMEs 
on  the  ground  would  be  kept  in  place  as  it  is.  Budget  would  be  in  the  order  of  €60 
million/year. 

• 
Support  for  SME  abroad,  aimed  at  supporting  the  internationalisation  of 
European SMEs in third country markets, especially in the fastest-growing economies, 
would  continue  through  limited  financial  support  to  existing  initiatives  such  as  the 
China IPR Helpdesk and the EC-Japan Centre with a budget of €2 million/year.  

•  Support  to  international  industrial  cooperation  with  candidate  countries  and  the 
European Neighbourhood countries aiming to facilitate EU - third country convergence of 
industrial policy and regulatory frameworks would be continued at a modest level of €1 
million/year.  

Option 2 – Discontinuation 

This option would see a halt to all current financial intervention with a budget saving of about 
€213  million/year.  EU  action  would  be  limited  to  regulatory  actions  aimed  at  creating 
supportive  framework  conditions  (for  example,  in  the  case  of  access  to  finance,  regulatory 
measures  aimed  at  improving  the  legal  and  commercial  environment  for  venture  capital 
operations).  

Scenario 3a – Significant budgetary expansion for all components 

Under this scenario, which is not considered as a viable policy option and is presented as a 
hypothetical  point  of  reference,  the  overall  budget  would  increase  considerably  (to  €883 
million/year)  and  all  competitiveness-  and  SME-related  components  of  the  EIP  as  of  2013 
would be expanded to the level considered optimal by the external study.  

•  An  increase  in  the  budget  for  activities  to  improve  European  competitiveness  (to  €20 
million/year)  would  allow  the  launch  of  new  complementary  actions  needed  for  the 
implementation  of  the  Europe  2020  flagship  "An  Integrated  Industrial  Policy  for  the 
Globalisation  Era". This would include implementing new industrial policy actions such 
as  the  development  of  new  sustainable  product  policies,  the  follow  up  to  High  Level 

EN 

30 

  EN 

 
Group on Business Services, and support for the new policy initiative on corporate social 
responsibility. An important goal of such activities would be to use relatively small EU-
level  funding  to  leverage  much  larger  participation  by  Member  States  and  the  private 
sector.  

•  An  increase  in  the  budget  for  activities  to  develop  SME  policy  and  promote  SMEs 
competitiveness (to €10 million/year) would allow new measures to take into account the 
new  political  priorities  identified  by  the  SBA  Review,  in  particular  by  enhancing  the 
governance  structure  and  monitoring  of  SBA  implementation  through  the  SME 
Performance Review, exchange of good practices and communication activities.  

•  Activities targeting specific sectors: 

• 
The  increase  in  the  budget  of  the  component  new  business  concepts  for 
sustainable,  user-driven  design-based  consumer  goods  (to  €20  million/year)  would 
allow broadening the range of instruments available. The financing of 20 to 25 pilot 
and  market  replication  projects  would  be  envisaged  each  year.  Projects  would 
encourage  market  uptake  of  competitive  business  models  to  achieve  multi-
functionality  of  products,  intelligent  manufacturing  and  the  smart  value  chain,  new 
design  and  product 
increased  customisation  and 
personalisation  of  products.  Part  of  the  budget  would  be  devoted  to  enhancing 
specialised skills and facilitating multi-sector collaboration. 

life  cycle  concepts,  and 

• 
An  increase  in  the  budget  and  scope  of  the  instrument  covering  Tourism-
related measures would encompass the challenges confronting enterprises and public 
stakeholders in the sector. This would include an expansion of actions addressing the 
reduction  of  seasonality,  the  diversification  of  transnational  tourism  products,  the 
enhancement  of  sustainability  and  promotion  of  sustainable  and  inclusive  tourism 
products,  services  and  destinations,  EU-level  collection  and  coordination  of  socio-
economic  data  and  research,,  the  uptake  of  ICT  and  the  improvement  of  skills, 
professionalization and mobility of personnel. It would also imply an expansion of the 
scope  of  intervention  to  new  activities,  focusing  especially  on  joint  strategies  for 
tourism  promotion  targeting  both  the  EU  and  third  countries’  markets  and  enhanced 
international cooperation in tourism. The budget would be €35 million/year. 

•  An increase in the budget for promotion of entrepreneurship (to €18 million/year) would 
accelerate  the  development  and  implementation  of  common  European  solutions  to 
disseminating  best  practice.  In  particular,  the  increased  budget  would  more  developed 
exchanges  of  experience  between  entrepreneurs  and  to  foster  entrepreneurial  attitudes, 
skills and capabilities, in particular of women and young people. This would involve the 
provision  of  support  to  Member  States  and  regions  willing  to  launch  programmes 
implementing best practices already tested at EU level. 

•  A major increase in the budget for Financial Instruments (to €700 million/year from its 
baseline  level  of  €113  million/year)  would  allow  for  a  considerable  expansion  of 
activities, providing a much-needed increase of risk sharing finance in particular venture 
capital and mezzanine capital: 

EN 

31 

  EN 

 
o 

o 

o 

€300 million/year for several (up to fou r) “fund-of-funds”, which would invest 
in venture capital funds which subsequently invest in enterprises, in particular 
in their internationalisation stage , but also in others, and support a structural 
development  bringing  an  EU-wide  venture  capital  market  closer  towards  the 
level of comparable economies, such as the USA;  

€150  million/year  for  investments  in  venture  capital  and  mezzanine  funds 
which  invest  in  particular  in  growth-oriented  enterprises  with  a  potential  to 
internationalise; 

€250 million/year for a loan guarantee faci lity, providing direct or other risk-
sharing  arrangements  with  financial  intermediaries.  The  facility  would 
generate a high leverage effect and would provide the cross-border and multi-
country lending that could not easily be achieved through facilities at national 
level, and for securitisation of portfolios of SME loans. 

The choice of instruments is based on the evaluations, the external study, market analysis 
and,  in  particular,  in  close  cooperation  with  the  EIF.  Since  each  financial  instrument  is 
market-based,  they  would  receive  only  tentative  initial  allocations,  in  order  to  allow 
flexibility in adapting to market conditions that are likely to change during the lifetime of 
the programme. This applies also to Options 3b and 3c. 

•  Further development of EU-level SME support networks: 

An  increase  in  the  budget  for  the  Enterprise  Europe  Network  to  €65 

• 
million/year  would  allow  opening  up  the  Network  to  more  third  countries  and  put 
some  mechanisms  in  place  to  support  the  internationalisation  of  SMEs  in  third 
countries.  Under  this  scenario,  the  Network  would  be  able  to  connect  and  link  to 
actions  developed  worldwide  by  other  Commission  services  (such  as  SME/business 
centres, brokerage events programmes, Gateways), and accelerate integration of new 
Network members from third countries. It would provide support to the forthcoming 
EU strategy to support the internationalisation of SMEs beyond the EU.  

A  major  increase  in  the  budget  for  support  for  SME  abroad  (to  €12 

• 
million/year)  would  allow  broadening  the  range  of  instruments,  including:  (i) 
coordination  and  information  dissemination  activities,  (ii)  strengthening  of  existing 
SMEs support structures in key third markets, and (iii) establishment/expansion of EU 
support  structures  in  key  third  markets  based  on  mapping  of  existing  services 
reinforcing European Business Organisations abroad and where appropriate setting up 
additional EU SME support centres.  

•  An increase in the budget (to €3  million/year) and the range of instruments for support to 
international industrial cooperation would include (i) industrial and regulatory dialogues 
with third countries (main trading partners), (ii) business-to-business dialogues with third 
countries,  (iii)  SME  policy  and  industrial  policy  co-operation  in  the  “near  Europe”.  It 
would extend the thematic and geographic scope of the co-operation with third countries 
and to increase the effectiveness and efficiency of the co-operation. 

EN 

32 

  EN 

 
Option  3b  -  Modest  budgetary  expansion  for  all  components:  Under  this  option  all 
envisaged  components  would  be  included  in  the  new  programme  at  a  level  of  financing 
matching  the  budget  envelope  foreseen  for  the  Competitiveness  and  SME  instrument  in  the 
Commission’s  proposal  for  the  next  MFF  (€340  million/year  on  average).  This  implies  that 
for  some  components  the  budget  considered  optimal  by  the  external  study  would  not  be 
available and activities would be restricted to the most essential. 

•  A limited increase in the budget for activities to improve European competitiveness to € 
14  million/year  would,  compared  to  Option  3a,  result  in  less  budget  for  all  actions 
foreseen. 

•  Activities to develop SME policy and promote SMEs competitiveness: same as baseline 

option (approximately €9 million/year) 

•  Activities targeting specific sectors: 

• 
Similarly  to  Scenario  3a,  the  proposed  increase  in  the  budget  (to    €12 
million/year)  of  the  component  new  business  concepts  for  sustainable,  user-driven 
design-based  consumer  goods  would  allow  broadening  the  range  of  instruments  to 
complement  previous  EU  intervention  in  areas  where  SMEs  face  similar  obstacles. 
Projects would encourage market uptake and competitive business models to achieve 
the objectives outlined in Scenario 3a. Part of the budget would be devoted to enhance 
specialised skills and facilitate multi-sector collaboration. 

• 
Under a moderate extension option, EU intervention in the tourism sector (to 
€18  million/year)  would  be  focused  on  a  core  set  of  activities  offering  the  highest 
potential  benefits  in  terms  of  economies  of  scale  and  generation  of  positive 
externalities. This would imply the continuation of the measures currently undertaken 
in  the  tourism  field  and  their  moderate  expansion.  The  focus  would  therefore  be  on 
sustainability  and  extension  of  seasonality,  the  diversification  and  promotion  of 
transnational  high-quality  and  inclusive  tourism  products  and  services,  use  of  ICT, 
skills and the consolidation of the socio-economic knowledge base in the sector. 

•  An increase in the budget for promotion of entrepreneurship (to €12 million/year) would 
allow accelerating the development and implementation of common European solutions to 
disseminating  best  practices.  In  particular,  the  best  use  of  this  moderately  increased 
budget  would  be  to  enhance  the  number  of  exchanges  of  experiences  between 
entrepreneurs.  

•  Financial Instruments: a budget of €200 million/year woul d allow both debt and equity 
instruments to be funded, albeit at a lower level than in Scenario 3a and Option 3c. The 
budget would be indicatively split as follows:  

o 

€100  million/year,  including  the  establis hment  of  one  fund-of-funds,  which 
would invest in venture capital funds that in turn invest in enterprises with high 
growth potential in their expansion and internationalisation stages, but also in 
others,  and  a  limited  amount  which  would  be  invested  directly  in  venture 
capital funds; 

EN 

33 

  EN 

 
o 

€100  million/year  for  a  loan  guarantee  facili ty,  providing  direct  or  other  risk 
sharing  arrangements  with  financial  intermediaries  to  cover  loans  for  SMEs. 
The facility would generate a high leverage effect and would provide the cross-
border  lending  or  multi-country  lending  that  could  not  easily  be  achieved 
through facilities at national level. 

•  Further development of EU level SME support networks: 

• 

• 

The Enterprise Europe Network: same as baseline option (€60 million/year). 

Support for SME abroad: same as Scenario 3a (€12 million/year).  

•  International industrial cooperation: same as Scenario 3a (€3 million/year). 

Option 3c – Modest budgetary expansion with focus on the main components 

Under  this  option  the  overall  budget  of  the  new  programme  would  increase  to  €340 
million/year  (as  proposed  in  the  MFF  Communication),  but  these  resources  would  be 
concentrated on the financial instruments and the Enterprise Europe Network. This option is 
considered  because  some  stakeholders  during  the  public  consultation  proposed  that  limited 
EU  budgetary  resources  should  be  devoted  to  the  most  successful  measures  of  the  current 
programme. 

•  An increase in the budget for Financial Instruments to €280 million/year would allow for 

a significant expansion of activities.  

o 

o 

€185  million/year,  for  the  establishment  of  one  or  two  funds-of-funds,  which 
would invest in venture capital funds that in turn invest in enterprises with high 
growth and a potential to internationalise, but also in others; in addition there 
would be investments directly into venture capital funds focussing on growth 
stages;  

€95  million/year  for  a  loan  guarantee  faci lity,  providing  direct  or  other  risk 
sharing  arrangements  with  financial  intermediaries  to  cover  loans  for  SMEs, 
including securitisation. The facility would generate a high leverage effect and 
would provide the cross-border lending or multi-country lending that could not 
easily be achieved through facilities at national level.   

•  The  Enterprise  Europe  Network  would  be  kept  in  place  but  with  a  shift  in  priority  in 
order to become an "entry point" for helping SMEs access to finance, including easing the 
provision  of  equity,  mapping  of  financing  available  for  SMEs  in  their  region  and 
investment readiness. Budget would remain in the order of €60 million/ year, as this shift 
of priorities is relatively easy to implement. 

•  All  other  activities  would  be  discontinued,  limiting  EU  intervention  to  the  creation  of 

supportive framework conditions through regulation. 

EN 

34 

  EN 

 
7. 

ANALYSIS OF IMPACTS  

This  section  analyses  the  impacts  that  could  be  achieved  under  the  various  options.  The 
following points need to be highlighted:  

•  First, given the composite nature of the proposed programme, the impact assessment was 
carried out primarily at the component level. Details of this work are provided in Annex 5 
which gives a more exhaustive analysis of each component and Annexes 6 and 10 which 
focus  on  tourism  and  financial  instruments,  respectively.  At  the  programme  level,  the 
analysis mainly consisted in the aggregation of impacts, complemented by consideration 
of synergies between the proposed activities. 

•  Second,  an  effort  was  made  to  achieve  a  quantification  of  the  main  socio-economic 
impacts, in terms of gross national product (GDP), value of lending/investment mobilised, 
employment  creation75 and number of  firms  assisted.76 However,  this quantification was 
not feasible  for the measures that  envisage the use of indirect instruments, that is, those 
aimed at creating facilitating conditions through information provision, benchmarking and 
exchange  of  good  practice,  where  impact  would  depend  upon  the  behaviour  of  market 
participants and administrations. Therefore, the quantification exercise was limited to the 
financial instruments, and, to a lesser extent, the Enterprise Europe Network. (It should be 
underlined,  however,  that  these  measures  account  for  the  predominant  share  of  the 
programme in terms of budget under all options.) 

An SME test and analysis of impacts on competitiveness were performed for each option and 
were found to be positive in all cases except discontinuation. A summary report on the SME 
test is provided in Annex 12. 

7.1. 

Impacts - Option 1  

Option 1 would entail no change from what is planned under the current programme. Support 
to competitiveness and entrepreneurship in Europe would be ensured through the continuation 
of ongoing activities. The costs of this option are €213 million/year.  

Many  of  the  initiatives  have  already  yielded  concrete  economic  impacts,  which  are  in  line 
with the anticipated targets for the activities under the current programme.  

–  Over  the  next  programme  period,  the  financial  instruments  are  expected  to  result  in  an 
increase  of  GDP  (added  value)  of  approximately  €660  million  per  year  and  to  generate 
about  €1.8  billion  in  additional  lending/equ ity  investment.  Some  progress  would  be 
expected  in  countering  the  fragmentation  of  the  venture  capital  industry.  The  collateral 

75 

76 

Analytically,  it  proved  impossible  to  distinguish  between  jobs  created  or  safeguarded.  Nevertheless, 
from a social point of view, saved jobs are also important. 
The  estimates  were  obtained  using  a  static  computational  model,  primarily  based  on  two  sets  of 
parameters:  (i)  the  ratios  between  the  amounts  made  available  under  the  proposed  option  and  the 
number of enterprises served or the volumes of lending and venture capital investment mobilised; (ii) 
unit impact parameters, summarising the effects generated by the proposed option on employment and, 
indirectly, on value added. The estimates refer to net impacts alone, adjusted downwards to take into 
account  possible  modeling  errors  and  the  fact  that  some  of  the  proposed  measures  may  not  be  fully 
additional but overlapping. 

EN 

35 

  EN 

 
                                                 
constraint would be directly and indirectly addressed through loan guarantees.77 It should 
be noted, however, that under the current programme, there is substantial excess demand 
that the EIF is currently unable to meet due to budgetary limitations.   

–  Concerning  indirect  support,  more  than  600  partners  of  the  Enterprise  Europe  Network 
provide services all over Europe and beyond to SMEs. It contacts more than 2.5 million 
SMEs  via  newsletters  every  week.  Since  its  launch  in  2008,  the  Network  has  involved 
1,045,567 SMEs in local promotion and information events via 19,115 organised events. 
More than 376,467 SMEs have been helped with queries on EU matters. About 142,243 
expressions  of  interest  on  partnership  proposals  have  been  registered  and  4,320 
partnership  agreements  have  been  concluded.  More  than  10,000  SMEs  have  been 
consulted  on  forthcoming  legislation,  such  as  the  European  working  time  Directive  or 
European contract law. This is well in line with its targets of 5,800 local events per year, 
2.34  million  of  SMEs  reached  per  year,  90,000  SMEs  receiving  advice  after  3  years, 
25,000  SMEs  participating  in  promotional  events  after  3  years,  1700  concluded 
partnership agreements on average per year78. The activities of the Network are expected 
to generate an increase of €200 million of incr emental turnover per year for assisted firms. 

Under  Option  1,  European  business  support  services  provided  under  the  Network  (€60 
million/year)  would  continue  to  ensure  that  SMEs  are  aware  of  European  policies  and 
actions. Tools which help to integrate business' concerns into EU policy-making would be 
maintained, ensuring that the voice of small businesses is heard. The services offered by 
the Network would improve their cost-effectiveness. 

The  Network  would  not  be  able  to  absorb  a  significant  increase  in  funding  without  an 
expansion  of  its  geographical  coverage  or  its  activities.  Such  a  change  was  not  widely 
supported  by  stakeholders  in  the  public  consultation.  Many  participants  underlined  that 
the role and activities of the Network should remain focused and the number of services 
should not to be extended beyond reasonable limits, in order for the Network to continue 
to provide high quality services. 

–  Other activities to be continued under the programme would account for €40 million/year 

on  average  and  would  address  SMEs  more  indirectly  by  improving  the  framework 
conditions under which they operate. The impacts are not quantifiable but would include 
the  following  features.  The  trend  towards  best  practice  dissemination  and  cross-
fertilisation would continue. However, the effectiveness of  support measures is likely to 
stay at a low level as the development of a clear policy framework could not be pursued. 
The deployment and commercialisation of new sustainable consumer goods would remain 
below potential, as only background analysis would be provided. Support to SMEs abroad 
would  remain  limited  to  key  markets  and  areas  and,  as  regards  international  industrial 
cooperation, activities would concentrate on monitoring framework conditions impacting 
on  the  external  competitiveness  of  European  enterprises.  Other  actions  would  remain 
outside  of  the  scope  of  the  SME  and  Competitiveness  programme,  including  supporting 
further SME centres abroad. There is a possibility that these could be carried on through 
external action programmes, which would still need to have an important European SME 
and competitiveness policy component. 

77  
78 

More detailed information on impacts is provided in Annex 10. 
EIP Final Evaluation, April 2011 

EN 

36 

  EN 

 
                                                 
Moreover, evidence drawn from the interim evaluation of the Erasmus for entrepreneurs 
programme shows the impact of the exchange programme in relation to several problems 
that the proposed programme is supposed to tackle79: 

o  Lack  of  entrepreneurial  spirit:  the  programme  helps  increase  new  entrepreneurs 
confidence  to  start  a  business  and  helps  entrepreneurs  acquire  the  skills  needed  to 
successfully start and run a business. 

o  Lack of entrepreneurial skills: the programme helps build entrepreneurial skills through 
direct  coaching  of 
the  new  entrepreneur  by  an  experienced  entrepreneur. 
Acknowledging the need for future entrepreneurs to have managerial competence, some 
Member  States  require  a  certificate  ensuring  that  new  entrepreneurs  have  such  skills 
before they can start a business. 

o  Lack of sustainability of nascent businesses: 50% of the companies created in the EU 
do  not  survive  the  first  five  years.  The  exchange  programme  increases  the  quality  of 
business start-ups and their long-term sustainability. 

o  Internationalisation:  SMEs  do  not  take  enough  advantage  of  the  internal  market  and 
international 

have  difficulties  accessing 
experience appears as one of the main drivers for internationalisation 

international  markets.  SME  founders’ 

Positive social impacts are expected in different forms. 

–  As  regards  the  financial  instruments,  positive  social  impacts  are  expected  in  terms  of 
assisting  approximately  26,000  firms,  generating  and/or  safeguarding  more  than  16,000 
jobs per year.   

–  The activities of the Network are expected to generate and/or safeguard 1,000 jobs as well 

as develop 900 new products, services or processes per year.  

–  Other support measures addressing the overall business environment are also expected to 
yield social impacts, but it is difficult to quantify the number of SMEs directly benefiting 
from them. For instance, in 2010, the European SME Week consisted of more than 1,504 
national, regional and local events that took place in 37 participating countries. According 
to the EIP final evaluation, it was estimated that about 300,000 SMEs participated in those 
events.  

Environmental  impacts  are  positive  due  to  environmental  support  for  sustainability 
objectives provided through networking, funding and investing in resource efficient and low-
impact  solutions  through  the  Enterprise  Europe  Network.  These  impacts  are  striking:  for 
instance, by 2011, Network partners  are expected to deliver  environment-related  services to 
about  7,500  SMEs  and  sign  cooperation  agreements  with  more  than  400  environmental 
service providers. 

In the light of the experiences with the current programme, the baseline scenario is likely to 
develop  modest  synergies  among  different  components,  most  prominently  between  the 

79  

http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/erasmus-
entrepreneurs/background_en.htm 

EN 

37 

  EN 

 
                                                 
Financial Instruments and the Enterprise Europe Network. However, as noted by stakeholders 
during the public consultation, there is lack of clarity of the intervention logic involving other 
smaller actions, which are not unified by a strategic approach and eventual synergies will be 
driven  by  an  incremental  and  piece-meal  evolution.  For  instance,  the  European  Network  of 
Female  Entrepreneurship  Ambassadors,  inspired  by  Swedish  and  UK  national  programmes 
which  provided  promotion  and  support  to  women  wanting  or  preparing  to  start  up  a  new 
enterprise,  will  be  complemented  from  2011  on  by  the  European  Network  of  Mentors  for 
Women  Entrepreneurs  which  will  provide  mentoring  services  to  women  entrepreneurs  who 
have recently started an enterprise.  

Based  on  the  above  considerations,  and  in  line  with  the  findings  of  the  final  evaluation  of  the 
current  programme  and  the  external  study,  Option  1  would  achieve  the  objectives  of  the  new 
programme  to  a  certain  degree.  The  EIP  final  evaluation  confirmed,  however,  that  the  current 
scale of the programme is only slightly mitigating the underlying problems of EU competitiveness 
and  entrepreneurship.  Option  1  would  imply  that  initiatives  that  are  currently  operating  below 
optimal  scale  would  remain  under-developed,  including  in  areas  where  there  is  a  clear  need  to 
expand EU action (such as the financial instruments). In the current economic climate, it is likely 
that the simple continuation of the current programme under more difficult conditions resulting 
from the economic crisis would help address the problems but it would not be able to alter the 
likely evolution of the problem considerably. 

7.2. 

Impacts - Option 2 

The  assessment  of  the  economic  impacts  of  Option  2  implies  responding  to  the  question: 
“What  would  be  the  budget  saved  and  the  foregone  benefits  of  a  discontinuation  of  all 
initiatives under the current programme?”  

The  main  benefit  from  Option  2  would  be  a  budget  saving  of  approximately  €213 
million/year,  which  corresponds  to  the  budget  allocation  to  the  EIP’s  competitiveness, 
entrepreneurship and SME-related activities in 2013. 

–  The  foregone  benefits,  however,  would  be  significant.  For  example,  current  activities 
under the financial instruments, which represent about half of the EIP budget with about € 
113 million allocated annually, are estimated to have so far generated about € 1.8 billion 
per year in additional lending/equity investment facilitated.80 Fragmentation of the venture 
capital  industry  would  persist  and  probably  aggravate.  SMEs  would  face  more  stringent 
collateral requirements due to Basel III. 

–  Looking  at  the  other  measures  in  place,  the  costs  of  Option  2  clearly  outweigh  the 
benefits. For example, terminating the activity of the Network would entail a loss of € 200 
million/year of added value in incremental turnover for assisted firms; a loss of 1,000 jobs 
created and/or safeguarded per year; a loss of 900 newly developed products, services or 
processes per year compared with the baseline option.81 These effects would impair access 
to  the  Single  Market  by  European  SMEs  and  would  slow  down  the  pace  of  developing 
cross-border collaboration.  

80 
81 

External study, Economisti Associati, 2011 
External study, Economisti Associati, 2011 

EN 

38 

  EN 

 
                                                 
Furthermore, without financial support from the European level, national business support 
services would have less incentive to operate and to provide feedback to the Commission. 
They would thus not be a European focal point for first-hand information about business 
activities,  and  the  EU  would  lack  an  instrument  for  dissemination  of  best  practices, 
counselling, feedback and relay functions focussed on SMEs. Spontaneous collaboration 
between  national  services  is  unlikely  without  European  coordination,  as  national  or 
regional partners are unlikely to see an interest in offering common cross-border services. 

–  As  regards  the  discontinuation  of  other  activities,  Option  2  would  deprive  national  and 
regional actors of existing opportunities to work together, learn from each other and make 
quicker  progress  towards  common  goals  through  the  exchange  of  best  practice, 
benchmarking and expert groups in SME and entrepreneurship policy. Successful current 
activities  such  as  the  SME  week,  the  Ambassador  scheme  for  female  entrepreneurs,  the 
network  of  European  destinations  of  Excellence  (EDEN)  and  the  China  IPR  SME 
Helpdesk  would  be  terminated  and  their  positive  impact  on  European  competitiveness 
would be lost. 

As far as impacts on SME’s are concerned, Option 2 would mean failing to sustain existing 
actions as well as failing to deliver on the commitments enshrined in the Review of the Small 
Business  Act  and  the  Industrial  Policy  Flagship.  This  would  mean  leaving  the  effort  of 
promoting entrepreneurship and the competitiveness of SMEs wholly to the Member States.  

Furthermore,  discontinuation  under  Option  2  would  not  only  directly  affect  SME’s  but  also 
mean  foregoing  the  positive  social  and  environmental  effects  as  described  under  the 
baseline  option,  as  well  as  existing  synergies  among  different  components  of  the  current 
programme.  

Option 2 would save the resources currently devoted to the EIP but it would negatively impact 
on  the  EU’s  long-term  competitive  position  and  further  widen  the  gap  with  its  main 
competitors. Cost savings would be accompanied by much higher forgone benefits. Based on 
the above considerations, and in line with the findings of the final evaluation of the current EIP, 
the external study and feedback from stakeholders during the public consultation, it emerges that 
Option 2 would fail to contribute to Europe’s entrepreneurship and competitiveness objectives 
on all fronts. 

This  conclusion  is  in  line  with  the  responses  to  the  CIP  public  consultation  and  the 
conclusions  of  the  public  conference.  The  main  message  was  that  any  future  programme 
should be carefully designed to build on what has already been achieved.  

7.3. 

Impacts - Scenario 3a  

On  the  cost  side,  Scenario  3a  involves  a  significant  increase  in  budget  to  a  total  of  €883 
million/year compared to €213 million/year in Opti on 1. By far the biggest increase would be 
for  financial  instruments  (from  €113  million/year   to  €700  million/yea r),  which  would  allow 
significant  scaling-up  of  the  level  of  intervention  and  strengthening  the  range  of  financial 
instruments available. This would respond to one of the messages of the public consultation, 
where  the  Commission  was  asked  to  provide  a  wider  range  of  financial  instruments 
addressing  different  needs  and  responding  to  future  market  conditions.  For  example,  it  was 
asked  to  consider  support  to  mezzanine  funds  or  business  angels.  These  elements  would  be 
included in this scenario. 

EN 

39 

  EN 

 
On the benefit side, Scenario 3a would generate substantial economic impacts:  

–  These  would  be  primarily  measured  in  terms  of  incremental  GDP  from  the  financial 
instruments, estimated at an increase in GDP of approximately €2.3 billion per year. The 
financial  instruments  under  this  scenario  are  also  estimated  to  generate  €7.2  billion  in 
additional  lending  and  equity  investment  compared  to  the  baseline  scenario.  These 
estimated benefits of financial instruments only concern the direct impacts, i.e. impacts on 
the  benefiting  enterprises,  without  consideration  of  wider  impacts.  The  latter  would 
include indirect impacts on other economic actors, in terms of increased business activity 
(e.g.  an  increase  in  output  from  the  suppliers  to  the  enterprises  assisted  under  the 
programme), as well as induced impacts, resulting from increased household spending due 
to the direct and indirect increase in economic activity. While a precise quantification of 
indirect  and  induced  impacts  is  not  feasible,  previous  studies  on  similar  financial 
instruments  suggest  that  they  could  account  for  anywhere  between  50%  and  100%  of 
direct impacts.82 In particular, substantial indirect impacts are to be expected in the case of 
intervention in support of venture capital investments, which exert a deep impact on the 
business process, contributing to the emergence of entirely new lines of businesses.83  

All  financial  instruments  will  have  impacts  beyond  the  programme  period,  in  particular 
those  that  help  to  create  new  financing  markets  for  SMEs  (such  as  the  further 
development  of  the  securitisation  instrument).84  They  will  act  as  a  catalyst  to  accelerate 
national  policy  development  in  the  field  of  access  to  finance,  contribute  to  the 
development of new SME financing instruments and increase the supply of development 
equity  for  SMEs  in  their  expansion  stage  (“follow-on”  capital  in  order  to  bring 
products/services  to  market,  to  continue  cross-border  activities  and  to  allow  further 
growth). They will increase the supply of debt finance for SMEs that lack the necessary 
collateral to obtain such loans. They will contribute to capacity-building in countries with 
banking intermediation that is significantly lower than the EU-average, in partnership with 
the international financial institutions that provide loans to these countries.  

Regarding the financial instruments, Scenario 3a would constitute a major increase in the 
level of funding for the EU venture capital market. About two thirds of the total budgetary 
resources would be allocated to venture capital and more than 40% would be destined to 
setting  up  three  or  four  “funds-of-funds”  in  public-private  partnership  with  institutional 
and strategic investors. Such actions would need to be finely tuned as to avoid influencing 
capital  allocation  processes,  create  disincentives  and  crowding-out.  Taking  these  factors 
into consideration would require a cautious and stepwise approach, which would tend to 
indicate that a low level of EU funding, combined with legislative measures to reduce the 
fragmentation  of  the  EU  venture  capital  market  might  be  preferable.  These  instruments 

82  

83 

84 

Hayton  K.  and  others,  Evaluation  of  the  Scottish  Co-Investment  Fund,  Report  to  Scottish  Enterprise, 
May 2008 ; EKOS Limited, Economic Evaluation of South of Scotland Loan Scheme, Final Report for 
SEBSED Ltd, June 2008. 
An  example  is  the  telecom  system  Skype,  whose  early  development  was  actively  supported  by  an 
equity  investment  under  one  of  the  predecessors  of  the  proposed  programme,  the  ETF  facility.  Apart 
from  the  financial  profits  generated  (Skype  was  reportedly  sold  to  eBay  for  about  US$2.6  billion  in 
2005 and later re-sold to Microsoft for US$8.5 billion), the emergence of Skype dramatically altered the 
landscape in the telecoms sector, bringing about a remarkable decline in the cost of communications, 
which  in  turn  generated  further  business  opportunities  in  areas  that  depend  on  telecoms  (such  as  call 
centres and telephone marketing). 
A detailed discussion about the envisaged instruments is provided in the external study. 

EN 

40 

  EN 

 
                                                 
would structurally reinforce the venture capital industry and reduce its fragmentation. An 
improved  range  of  financial  instruments  would  be  available.  Furthermore,  the  collateral 
constraint would be directly addressed through loan guarantees and securitisation. 

Similarly to the venture capital measures, the risk-sharing facilities for debt financing in 
Scenario  3a  would  have  a  structural  effect,  making  possible  an  increase  in  the  credit 
volume  of  €5.5  billion  per  year.  This,  however ,  might  raise  concerns  whether  such  an 
increase  in  public  sector  risk  sharing  and  coverage  would  result  in  private  guarantee 
providers withdrawing to some extent from the market (“crowding-out)”. 

–  The increase in budget for the Enterprise Europe Network (from €60 million/year to €65 

million/year)  would  allow  opening  up  the  Network  to  more  third  countries  and  put  new 
mechanisms in place to support the internationalisation of SMEs. The change in scale and 
scope  of  the  Network's  activities  would,  however,  be  modest  and  it  was  not  possible  to 
quantify  it.  Compared  to  the  baseline,  positive  economic  impacts  can  nevertheless  be 
expected  via  improved  support  to  SMEs  covering  new  themes  and  new  geographical 
areas. 

–  The  budget  of  the  remaining  activities  would  also  increase  considerably  under  this 
scenario  (from  €40  million/year  to  €118  milli on/year).  Again,  quantitative  impacts  are 
difficult  to  measure,  but  positive  impacts  could  be  expected.  Activities  to  improve 
European competitiveness and entrepreneurship would lead to relevant policies based on 
best  practices  being  implemented  at  EU  and  Member  State  level.  As  regards  consumer 
goods,  the  deployment  of  market  replication  projects  would  be  significant,  with  40 
projects to be supported per year. This would bring forward the commercialisation of such 
products, with positive effects on sustainability and consumer satisfaction as the number 
of  available  user-driven  products  and  services  would  be  increased.  Tourism-related 
actions  would  further  help  businesses  to  save  costs,  improve  their  competitiveness, 
stimulate the regional economy, and improve sustainable and inclusive development and 
to  fulfil  the  guests’  expectations  in  this  respect.85  As  regards  SME  business  support  in 
markets  outside  the  EU,  a  considerable  scaling-up  of  financial  support  would  lead  to 
increased direct presence of SMEs in key global markets, as they could rely on specialised 
support. Improved international cooperation would also have positive impacts on business 
internationalisation. 

Several interventions envisaged under Scenario 3a would have positive social impacts.  

–  A  major  contribution  to  employment  would  be  expected  from  the  financial  instruments, 
which  are  estimated  to  contribute  to  the  generation  and/or  preservation  of  more  than 
50,000  jobs  and  assisting  approximately  65,000  firms  more  compared  to  the  baseline 
option.  

–  The  Network  would  be  expected  to  have  an  impact  of  1750  additional  created  or 
safeguarded  jobs  per  year  compared  to  baseline.  Quantitative  improvements  would  be 
accompanied by significant advances in qualitative terms, which would empower SMEs in 
the development of solutions to common challenges. 

85 

As demonstrated by the preparatory actions EDEN and CALYPSO: 
http://ec.europa.eu/enterprise/sectors/tourism/index_en.htm 

EN 

41 

  EN 

 
                                                 
 
Scenario 3a would also bring about environmental impacts:  

–  The  expansion  of  the  Network  would  spread  the  EU  environmental  rules  to  additional 
third  countries,  generalising  best  practices.  Increased  collaboration  with  Member  States 
through supporting best practices in relation to support for green businesses would result 
in  improvements  in  policy  co-operation  and  co-ordination  across  the  EU.  The  Action 
Programme  on  Administrative  Burden  Reduction  that  was  funded  through  the  EIP  is  an 
example of this virtual circle. Moreover, small-budget sectoral studies financed by the EU 
can  be  used  as  the  catalyst  for  major  public-private  sector  initiatives  (such  as  the  early 
development of the project on user-driven consumer goods). 

–  Environmental impact would also come from the scaling-up of other initiatives in support 
of eco-sustainable processes and products in traditional industrial sectors and in tourism. 
First,  initiatives  in  the  area  of  personalised  consumer  goods  would  allow  companies  to 
match  production  and  demand,  contributing  to  more  sustainable  consumption  patterns. 
Second, tourism would be more closely linked to the environment, as travel is responsible 
for a significant share of CO2 emissions and tourists’ behaviour can significantly impact 
on  the  local  territory.  Sustainable  management  both  at  enterprise  and  destination  level, 
detailed  information  and  awareness-raising  campaigns  for  visitors  and  staff,  as  well  as 
uptake  of  sustainable  products  and  processes  on  the  ground  would  considerably  help  to 
reduce the environmental impact of tourism.86 

Based on the above considerations, it emerges that Scenario 3a would achieve the objectives of 
the  new  programme  to  a  considerable  degree,  although  at  a  cost  that  is  not  considered  by  the 
Commission to be compatible with other demands on the EU budget post-2013.  

7.4. 

Impacts - Option 3b 

Option  3b  refers  to  a  situation  in  line  with  the  budgetary  allocation  foreseen  under  the 
Commission’s MFF proposal, with an average yearly budget of €340 million. 

With this expansion of the budget compared to the baseline, economic impacts are expected 
to be higher than in the baseline scenario, as support to the financial instruments is increased 
considerably (from €113 million/year to €200 milli on/year). This can be expected to lead to 
sustainable effects. Yet this option would assume a more direct and increasing response from 
private investors but would provide a balanced approach in supporting the development of the 
European  venture  capital  market.  Considering  the  total  resource  level  in  Option  3b  and  the 
need  to  cover  both  the  venture  capital  and  the  guarantee  segment,  the  most  appropriate 
strategy would be to split the resources in a similar way to the baseline option.  

Regarding the potential crowding out of private guarantee providers, the new facility (at the 
suggested  resource  level)  is  expected  to  have  the  opposite  effect.  The  provision  of  loan 
guarantees  is  generally  recognised  as  one  of  the  least  distortive  public  interventions  in  the 
credit markets. The proposed facility will also cover cross-border and multi-country lending 
and  guarantee  schemes,  areas  with  higher  risks  where  very  few  private  guarantee  schemes 
operate. It is essentially a new market that will strengthen the Single Market and support SME 
internationalisation. In addition, the proposed facility will offer counter-guarantees and other 

86 

As demonstrated by the preparatory actions EDEN and CALYPSO, see above. 

EN 

42 

  EN 

 
                                                 
risk sharing arrangements to guarantee providers thus allowing them to expand their business. 
So,  overall,  far  from  crowding-out  existing  private  schemes  in  this  area  it  is  expected  to 
reinforce  them  and  attract  new  players  by  expanding  the  market  segment  and  providing 
additional funds. In particular, investment parameters will be set in such a way that specific 
policy objectives, including the targeting of particular groups of potential beneficiaries, can be 
achieved  while  still  preserving  the  market-oriented  and  demand-driven  approach  of  this 
instrument.  

Concerning  provision  of  venture  capital,  in  the  current  economic  circumstances,  private 
investors are withdrawing from the market at the same time as we see an increasing demand 
for  capital  from  SMEs.  It  is  a  vicious  circle  with  a  diminishing  market  for  institutional  and 
other  private  investors.  At  the  light  of  the  experience  accumulated  with  the  current 
programme, there is a long-standing, widely recognised shortage of venture capital in Europe, 
which is regularly confirmed by contacts with stakeholders, by studies and by the European 
Investment Fund, which has an unparalleled overview of the European VC market, since it is 
invested in almost 350 funds.  

–  Compared  to  the  baseline,  financial  instruments  are  expected  to  result  in  an  increase  of 
GDP  of  approximately  €500  million  above  base line  level  and  to  generate  about  €1.7 
billion in additional lending and equity investment. However, under this option, the focus 
of  the  financial  instruments  would  be  more  narrow  than  Scenario  3a,  addressing  the 
financial  needs  primarily  of  growth-oriented  enterprises,  but  also  including  young 
enterprises to some extent.  

The  level  of  budget  envisaged  for  the  financial  instruments  would  mean  that  it  would 
certainly  not  be  possible  to  meet  all  market  demands.  However,  the  venture  capital 
schemes would be focussing on cross-border operating funds, which thereby support the 
development  of  an  EU-wide  venture  capital  market.  Investments  in  funds  will  be  made 
alongside  private  investors.  For  the  guarantees  schemes  the  expected  leverage  of  EU 
budget  resources  is  about  1:30,  based  on  experiences  from  current  and  previous 
programmes. However, the leverage would, at least initially, not increase proportionally to 
the  resources,  but  the  number  of  beneficiaries  would  still  be  more  than  275,000  for  the 
programme period, i.e. an almost 50% increase compared to the baseline. 

–  Compared  to  the  baseline  option,  no  additional  impact  is  expected  by  the  Enterprise 

Europe Network as the budget is kept at the same level (€60 million/year).  

–  Under  this  option,  the  budgetary  allocation  for  other  activities  is  increased  in  order  to 
reach  a  more  appropriate  scale  (from  €40  m illion/year  to  €80  million/year).  A  limited 
increase  in  the  budget  for  support  for  European  competitiveness  to  €14  million  would 
make  it  possible  to  implement  some  of  the  new  actions  included  in  the  Europe  2020 
flagship  "An  Integrated  Industrial  Policy  for  the  Globalisation  Era"  as  compared  to  the 
baseline option. These new actions would notably relate to monitoring and best practice 
exchange at the level of Member States, launching initiatives relating to corporate social 
responsibility  as  well  as  new  preparatory  work  for  industrial policy  initiatives  related  to 
sustainability  in  specific  sectors.  The  corresponding  potential  for  leverage  in  terms  of 
influencing Member States programmes and expenditures and on private sector activities 
would  present  an  improvement  compared  to  the  baseline.  As  regards  SME  policy 
development, the same budget as under the baseline scenario would be maintained and the 
same  impacts  can  be  expected.  With  an  increased  budget  in  relation  to  user-driven 

EN 

43 

  EN 

 
consumer  goods  (to  €12  million),  it  would  be   envisaged  to  support  market  replication 
projects,  albeit  at  a  reduced  level  compared  to  Scenario  3a.  However,  it  would  still  be 
expected  to  support  20  projects  per  year  with  the  induced  impact  on  availability  and 
sustainability of products. 

–  Concerning SME business support in markets outside the EU, a considerable scaling up of 
financial support would lead to increased direct presence of SMEs in key global markets 
as they could rely on specialised support. Improved international cooperation would also 
have positive impacts on business internationalisation. 

In  stakeholders'  views,  a  future  programme  should  concentrate  on  creating  a  favourable 
business  environment,  including  support  to  access  the  internal  market,  standardisation  and 
better  regulation.  The  need  to  continue  the  exchange  of  best  practices  and  general  policy 
support  as  well  as  European  added-value  of  support  to  specific  sectors  was  also  widely 
recognised.  Specific  consultations  with  tourism  stakeholders  showed  strong  interest  and 
support in most Member States for transnational cooperation projects and exchange of good 
practices.  The  mid-term  evaluation  of  the  preparatory  action  “European  Destinations  of 
Excellence” underlined the scope for continuation and extension.87 

As regards social impacts,  

– 

the  financial  instruments  are  expected  to  assist  approximately  13,000  firms,  generating 
and/or safeguarding 11,000 jobs more than the baseline option.  

–  Moreover,  an  increase  in  budget  support  to  tourism-related  activities  (to  €18  million) 
would not only allow for the continuation of current activities, but also for their scaling-up 
and the addition of new support measures to tackle the issue of seasonality.88 Putting in 
place  measures  meant  to  tackle  seasonality  at  EU  level  would  counter-balance  the 
negative effects of seasonality by ensuring a wider time-wise spread of touristic/economic 
activity.  This  can  be  done  through  changing  marketing  techniques  and  by  creating 
incentives for different target groups, for example, youth and the elderly, as well as other 
groups, to visit destinations off-season. Positive externalities would be generated not only 
in economic but also in social returns.  

– 

87 
88 

In  general,  the  envisaged  measures  are  designed  to  be  open  to  all  groups  of  economic 
actors  and  in  this  sense  non-discriminatory.  However,  the  planned  activities  to  promote 
entrepreneurship  are  an  exception,  as  they  are  designed  to  also  target  specific  groups. 
Their aim is to promote and foster entrepreneurship across European societies, including 
social entrepreneurs, long-term unemployed, elderly workers, migrants, ethnic minorities. 
For  instance  activities  promoting  entrepreneurship  are  expected  to  lead  to  a  direct 
employment  effect  of  300-400  additional  jobs,  due  to  the  internationalisation  of 

http://ec.europa.eu/enterprise/dg/files/evaluation/report_eden_en.pdf 
The  core  of  the  problem  lies  in  the  concentration  of  tourists  in  certain  destinations  for  often  short 
periods  of  time  in  specific  periods  of  the  year.  This  phenomenon  results  in  the  congestion  of  local 
facilities and puts a destination’s resources under severe strain. Moreover, during the low season, these 
same  destinations  have  very  limited  touristic  activity,  with  obvious  negative  consequences  for  those 
employed in the sector and in terms of exploiting existing facilities in an efficient manner throughout 
the year. Overall, seasonality negatively affects the long-term sustainability of tourism in some areas. 
Data on the seasonality of tourism in Europe are available at 
epp.eurostat.ec.europa.eu/statistics_explained/index.php/seasonality_in_tourism_demand  

EN 

44 

  EN 

 
                                                 
 
beneficiary  entrepreneurs.  Awareness  campaigns  to  promote  exchanges  of  female 
entrepreneurs  are  planned  to  start  in  2012,  in  order  to  improve  the  46/54%  ration  of 
registered  entrepreneurs  for  this  programme.  Besides  these  proposed  measures  targeting 
young  people  and  women,  it  is  envisaged  to  conduct  promotion  campaigns  targeting 
specific  disadvantaged  or  vulnerable  groups  through  intermediaries  of  the  Enterprise 
Europe Network. 

–  The  increased  budget  for  the  exchange  programme  for  entrepreneurs  would  allow 
organising  1300  exchange  visits  per  three-year  cycle,  compared  to  900  today.  These 
mobility exchanges would likely increase the number of business start-ups, their survival 
rate,  and  the  extent  of  SME  internationalisation.  Based  on  the  interim  evaluation  report 
and previous estimations, this budget could contribute to the creation of some 200 start-
ups,  and  850  to  1,500  jobs  created  or  maintained  per  year  (including  additionality, 
displacement and indirect job creation effects).  

Environmental impacts are not expected to be significantly higher compared to the baseline, 
especially  as  a  result of  promotion of sustainable processes  and products in targeted sectors 
such as tourism. 

Aggregate  impact  due  to  synergies  among  the  different  components  of  the  programme  is 
expected  to  be  important  compared  to  the  baseline  as  the  reinforced  financing  of  different 
measures is expected to enhance cooperation between policy-makers at EU and national level. 
Strong emphasis would be placed on identifying and disseminating best practices.  

–  The  Network  would  be  the  centre-piece  connector  of  different  components  of  the 
programme, multiplying synergies between measures such as support to SMEs abroad and 
international  industrial  cooperation.  The  major  direct  benefit  would  be  to  increase  the 
Community dimension in the content of national policy as the Network would contribute 
to avoid duplication of efforts between Member States by disseminating information and 
know-how  of  best  practices.  This  development  is  expected  to  lead  to  an  increase  in  the 
number  and  quality  of  specific  national  and  regional  policies  on  SMEs  and 
entrepreneurship.  

–  Activities  to  improve  European  competitiveness,  on  the  one  hand,  and  the  activities  to 
develop  SME  policy  and  to  promote  entrepreneurship,  on  the  other,  will  be  mutually 
reinforcing  as  all  are  intended  to  improve  the  framework  conditions  under  which 
European businesses operate. 

–  Another  example  of  expected  synergies  is  the  interplay  between  the  Enterprise  Europe 
Network and other activities under the new programme. The services of the Network will 
cover  the  improvement  of  access  to  finance  for  SMEs  such  as  through  the  financial 
instruments. The “use” of the Network for the promotion of the financial instruments will, 
for  example,  make  further  promotional  activities  unnecessary.  The  Network  will  also 
promote the  internationalisation of SMEs  in close collaboration with the other measures 
envisaged  in  that  respect  (support  to  SMEs  abroad  and  international  industrial 
cooperation). 

–  As  regards  international  industrial  co-operation,  in  particular  the  government-to-
government  industrial  and  regulatory  dialogue,  the  objective  is  to  enhance  convergence 

EN 

45 

  EN 

 
between regulatory and business environments between the EU and third countries. As a 
consequence,  the  Network  will  benefit  if  there  is  more  convergence  because  that  will 
make  international  business  deals  easier.  Likewise,  the  SME  support  abroad  action  will 
benefit because regulatory  dialogues can  unlock  markets  and  therefore  make  them  more 
attractive for SME's to explore.  

Based on the above considerations, Option 3b would achieve in a satisfactory way the objectives 
of the new programme, by striking a balance between them and allocating scarce EU budgetary 
resources in a proportional way. The overall impact of the proposed programme, however, will 
depend on the surrounding economic conditions and this would be reflected in a flexible use of 
available instruments and measures. In any case, compared to the baseline option, impacts would 
be considerably higher. 

7.5. 

Impacts – Option 3c 

Option  3c  would  also  be  in  line  with  the  budgetary  allocation  foreseen  under  the  MFF 
proposal (€340 million/year), but the activities  would be limited to the financial instruments 
and the Enterprise Europe Network.  

In this option a priority would be given to venture capital investments so that the additional 
€80  million  compared  to  Option  3b  would  be  allocat ed  to  that  segment.  Thereby,  it  will  be 
possible to set up two fund-of-funds rather than one as is the case in Option 3b.  

Concerning economic impacts,  

– 

the  concentration  of  resources  mainly  on  the  financial  instruments  (€280  million/year) 
would  allow  further  reduction  of  the  estimated  market  gaps  for  SME  financing,  without 
being able to eliminate it completely. Since the resource level is less than half of Scenario 
3a  the  structural  effects  on  the  venture  capital  market  would  clearly  be  more  limited. 
Compared  to  the  baseline,  financial  instruments  are  expected  to  generate  an  increase  in 
GDP  of  approximately  €0.3  bil lion  and  €1.1  billion  in  a dditional  lending  and  equity 
investment facilitated. Some additional impact is expected from the Network compared to 
the  baseline,  due  to  the  shift  in  priority  to  become  an  "entry  point"  for  helping  SMEs 
access  to  finance  in  connection  with  the  increased  budget  for  the  financial  instruments. 
As, however, the budget for the Network is kept at the baseline level of €60 million/year, 
this effect is not quantifiable. 

–  The  main  economic  costs  under  this  option  would  concern  the  opportunity  costs  of  not 
tapping  the  European  added  value  which  could  be  generated  by  the  other,  smaller-scale 
support activities proposed under the baseline option and Option 3b. It is not possible to 
quantify  their  economic  impact  as  they  are  mostly  indirect  instruments,  i.e.  aimed  at 
creating facilitating conditions, whose ultimate impact would depend upon the behaviour 
of market participants and administrations.  

As regards social impacts under this option: 

–  Financial  instruments  would  create  an  additional  5,300  jobs  per  year  compared  to  the 

baseline. 

EN 

46 

  EN 

 
–  Nonetheless, this option would have a negative impact in terms of missed opportunities of 
European added value resulting from the discontinuation of the smaller-scale activities of 
the baseline scenario. Similar to the discontinuation option, the concentration on only the 
two  main  activities  of  the  current  programme  would  mean  failing  to  sustain  some 
important  existing  actions.  The  value  added  of  policy  coordination  at  European  level 
would be foregone and established networking structures in areas such as SME policy and 
tourism would be terminated. Moreover, without activities to support SMEs abroad, it is 
likely  that  European  SMEs  would  be  less  successful  in  seizing  the  opportunities  in 
emerging  markets  that  recent  studies  have  highlighted,  which  would  imply  negative 
economic and social impacts from this option.89 Furthermore, fact-based policy making at 
the European level would become more difficult without support from EU-level analysis 
and benchmarking activities. 

This  option  was  considered  because  in  the  final  evaluation  of  the  EIP  some  Government 
representatives and business organisations questioned the number of small-scale activities that 
are  supported  under  the  current  programme.  The  suggestion  was  that  there  ought  to  be  a 
greater concentration on a few main areas of activity in order to avoid dispersion.  

However,  the  final  evaluation  did  not  endorse  this  recommendation,  commenting  that  these 
views do not represent a balanced assessment of small-scale activities such as benchmarking, 
exchange  of  best  practices  or  networking  carried  out  under  the  EIP.  These  activities  suffer 
from a sub-optimal budgetary allocation, which allows only a minimal level of intervention, 
even in areas where there is a clear need to expand EU action. Other stakeholders (Member 
States´ representatives as well as business organisations) expressed strong support for smaller-
scale  activities  such  as  support  to  the  internationalisation  of  SMEs,  entrepreneurship 
benchmarks  and  the  dissemination  of  best  practices  in  entrepreneurship  policy  and 
implementation.  They  urged  that  measures  to  promote  entrepreneurship,  improve  the 
regulatory  environment  and  promote  corporate  social  responsibility  should  be  retained  in  a 
future  programme.  This  was  also  confirmed  in  the  public  consultation,  where  there  was 
widespread  support  for  measures  oriented  to  create  a  favourable  business  environment  for 
SMEs.90 

Environmental impacts are expected to be positive, but not significantly higher compared to 
the baseline. 

Aggregate impact due to synergies among different components of the proposed programme 
under  this  scenario  is  deemed  to  be  inferior  to  the  baseline  scenario,  as  only  synergies 
between Financial Instruments and the Network are going to be present. 

Based  on  the  above  considerations  and  the  recommendations  of  the  EIP  final  evaluation, 
Option  3c  would  partially  achieve  the  objectives,  but  at  the  cost  of  neglecting  certain 
underlying problems of competitiveness and entrepreneurship. 

89 
90 

EIM, June 2011 
Public consultation on the future EU support to competitiveness and innovation, p. 2 and 33 

EN 

47 

  EN 

 
                                                 
8. 

COMPARING THE OPTIONS  

8.1. 

Effectiveness 

Based  on  the  above  considerations,  and  in  line  with  the  findings  of  the  final  evaluation  of  the 
current EIP and the external study to inform this impact assessment, the baseline option  would 
achieve some of the programme’s general objectives, whereas Option 2, discontinuation of all 
to  promote  Europe’s  entrepreneurship  and 
current  European  measures,  would  fail 
competitiveness  capacity  on  all  fronts.  Option  3c  would  leave  many  of  the  underlying 
problems  untreated,  so  that  Option  3b  would  represent  the  best  response  to  the  identified 
objectives as well as being in line with budgetary reality.  

The externalisation of implementation tasks for the future programme to the successor of the 
Executive Agency for Competitiveness and Innovation will be confirmed and strengthened, as 
the performance audit of the current programme conducted by the IAS highlighted the scope 
for  more  outsourcing  in  order  to  improve  the  effective  use  of  staff  resources.  The  IAS 
recommended  to  analyse  the  cost-effectiveness  of  managing  diverse  one-off  actions  with  a 
view  to  standardising  their  management,  better  segregating  policy-related  work  and  budget 
implementation, and concentrating the funds on fewer types of financial operations under the 
next  Multiannual  Financial  Framework.  Therefore,  the  future  programme  would  be 
outsourced  significantly  more  to  EACI.  A  summary  of  the  expected  impacts  is  provided  in 
Annex  13.In  reply  to  the  recommendations  made  by  the  Court  of  Auditors  concerning  the 
effectiveness  of  the  SMEG,  any  future  programme  will  implement  improvements  to  the 
management of the Financial Instruments: 

–  signing  agreements  with  intermediaries  as  soon  as  the  programming  period  has  legally 

begun;  

–  any future fiduciary and management agreement (FAM) between the Commission and the 
EIF will specify a scoring system to be used by EIF in its selection of intermediaries; 

– 

in  order  to  reduce  the  relative  number  of  enterprises  that  have  used  a  loan  guarantee 
without actually needing it, it is envisaged that the future FAM will require that Guarantee 
Agreements signed by the EIF and the intermediaries reflect the undertakings in terms of 
EU added value. The EIF will be contractually required to check in their monitoring the 
system of decision making by the financial intermediaries to ensure that only enterprises 
that are in need of the instruments are using them. 

– 

the programme’s objectives will be translated into clearly defined eligibility criteria. 

A summary of the Court of Auditors' special report recommendations and the Commission’s 
reaction is provided in Annex 11. 

8.2. 

Efficiency 

In order to assess the efficiency of proposed options, the quantitative analysis covered three 
aspects: (i) the cost-effectiveness of the proposed measures, measured in terms of cost ratios 

EN 

48 

  EN 

 
linking budgetary outlays to the expected impacts91, (ii) administrative expenses for the EU92, 
and (iii) administrative expenses for beneficiaries93. 

8.2.1.  Cost-effectiveness 

As indicated above, it was not possible to arrive at a quantitative estimate of impacts for all 
the proposed measures. Nonetheless, the available data for financial instruments can provide 
useful indications of the level of cost-effectiveness under the different options, as they would 
account for the largest share in terms of budget of the programme under all options.  

Typical  cost-effectiveness  indicators  include  the  average  budget  allocation  per  enterprise 
assisted  and  net  incremental  value  added  per  budget  costs.  The  cost-effectiveness  of  the 
various options was analysed compared to the initial budgetary cost. However, it is important 
to note that in the case of financial instruments, budgetary allocations do not correspond to the 
final  cost  to  the  EU  budget,  as  resources  allocated  to  some  instruments,  such  as  venture 
capital funds, are largely recovered, sometimes with profit, in the longer term. The relevant 
parameters for the financial instruments are presented in the table below. 

Table 3 - Comparison of cost-effectiveness for financial instruments94 

Number of firms assisted/Budget cost of assistance (firms per €1 
million) 
Net incremental employment/Budget cost (jobs per €1 million) 
Net incremental value added/Budget cost (€ million per €1 
million) 
Budget cost per firm assisted (€) 
Budget cost per net incremental job (€) 

Option 1 - 
Baseline 

Option 3b - 
Modest 
expansion 

Option 3c - 
Focused 
expansion 

611

366

15

1637
2735

523 

354 

15 

1913 
2824 

280

228

10

3574
4385

The  differences  between  the  three  options  reflect  the  allocation  of  budget  between  venture 
capital  instruments  and  guarantee  instruments.  Cost-effectiveness  is  estimated  to  be 
comparable for Options 1 and 3b reflecting the fact that both entail a relatively high share of 
the  resources  being  spent  on  guarantee  instruments.  The  latter  reach  a  high  number  of 
enterprises  and  thereby  generate  a  substantial  employment  effect.  The  budgetary  cost  per 
enterprise  and  job  are  therefore  relatively  low.  Investments  via  venture  capital  funds  reach 
fewer enterprises, but would in the longer term generate substantial economic effects as well 
as jobs.  

The  outcome  of  each  of  the  two  expansion  options  is  sensitive  to  the  composition  of  the 
measures.  Option  3b  has  a  larger  part  of  guarantees  than  3c.  In  the  former,  the  guarantee 
instrument,  due  to  the  much  higher  leverage,  benefits  many  more  enterprises  and  generates 
more employment which leads to higher value added (GDP) per unit of budgetary resources. 
In  the  latter,  venture  capital  investments  based  on  new  product  and  service  concepts  in  a 

91 
92 
93 
94  

In terms of marginal job cost and incremental impact to budget cost 
Measured by the ratio of administrative personnel costs to the overall budget 
Based on the survey on administrative costs 
External study, Economisti Associati, 2011 

EN 

49 

  EN 

 
 
 
                                                 
longer perspective can generate higher value added and growth. EU venture capital spending 
can also contribute to the development of the equity market and strengthen the entrepreneurial 
eco-system.   

Additionally, an estimate of the cost-effectiveness for the Enterprise Europe Network can be 
provided  under  Option  1.  This  is  based  on  a  Client  Satisfaction  Survey  undertaken  in  2009 
among beneficiary SMEs, collecting impact data for partnership building services, which are 
the most important category of services provided by the Network.95 The average impact per 
firm  was  €  220,000  of  increased  tu rnover  per  year  and  0.6  jobs  created  or  safeguarded  per 
firm per year. This baseline cost-effectiveness is estimated to remain stable under all options, 
as the budgetary allocation does not change significantly. 

8.2.2.  Administrative Costs 

The  analysis  of  administrative  costs  for  the  different  options  is  based  on  two  factors:  (i) 
estimates  provided  by  the  EIP  final  evaluation  and  (ii)  information  on  expected  staffing 
levels. 

The estimates of administrative costs for grants under the baseline are in line with comparable 
schemes  (6.3%).  However,  as  a  large  part  of  the  budget  is  implemented  via  financial 
instruments,  which  exhibit  a  much  more  favourable  cost/budget  ratio  of  less  than  1%,  the 
overall performance of the programme is favourable. 

The  share  of  staff  costs  would  improve  for  Options  3b  and  3c  as  compared  to  the  baseline, 
due to significant economies of scale for financial instruments, the main measure under both 
options  in  budgetary  terms.  These  outweigh  the  impact  of  the  additional  resource-intensive 
small-scale activities envisaged under Option 3b. 

Details on the analysis of administrative costs are provided in Annex 14. 

8.2.3.  Administrative costs for beneficiaries: survey results 

A  survey  was  conducted  in  June  2011  on  the  administrative  costs  incurred  by  entities  that 
received support under the EIP. The survey covered the financial instruments, the Enterprise 
Europe Network and other EIP grants and provides evidence on the time spent and expenses 
incurred in the various steps of the procedure. For grant schemes the time needed on average 
is  160-180  staff  days.  In  the  case  of  financial  instruments,  it  varies  from  240  days  for 
guarantees to 70 days for venture capital investment. The ratio of costs to budgetary allocation 
varies from 0.5 % for financial instruments to 10.9 % for the Network. For other EIP grants it 
is  8.3  %.  Recurrent  activities  like  reporting  are  most  time-consuming,  followed  by  the 
preparation of applications for support. 

Beneficiaries made the following recommendations: 

– 

the use of lump sums and flat rates and the elimination of nominative indications of staff 
employed on the project, which would simplify the preparation of financial proposals as 
well as financial reporting and auditing;  

95  

Enterprise Europe Network Client Satisfaction Survey, Annex 9 

EN 

50 

  EN 

 
                                                 
– 

– 

the  reduction  and/or  simplification  of  administrative  documents  to  be  submitted  at  the 
application and/or at the contracting stage; 

the  elimination  of  the  need  for  private  sector  beneficiaries  to  provide  a  bank  guarantee; 
and  

– 

the simplification of periodic reporting and the adoption of on-line reporting. 

In reply to these recommendations, any new programme will contribute to the reduction of 
administrative burden by: 

–  applying the rules of the revised Financial Regulation; 

– 

further simplifying reporting and documents, and striking a balance with the requirements 
for  sound financial management of the EU budget; 

–  providing for on-line reporting. 

8.3. 

Coherence 

The success of some of the envisaged initiatives in this programme significantly depends on 
factors external to the programme, as well as to internal factors that are conducive to better 
performance.  

The  main  external  factor  for  the  success  of  potential  future  EU  intervention  in  the  area  of 
competitiveness  will  be  the  progress  of  overall  economic  recovery.  Any  intervention  at  EU 
level can only be of limited scale compared to the overall forces impacting on the economy. 
At the same time, the limited size of the programme requires a high degree of flexibility in the 
implementation stage in order to reap maximum benefits from the use of available resources. 

In addition, as underlined by the Europe 2020 strategy, European competitiveness can only be 
achieved through action taken in several fields and at different levels. Internally, it would be 
crucial to ensure that as many factors impacting on competitiveness as possible are addressed 
by  the  future  programme.  Therefore,  Options  2  and  3c  would  score  badly  compared  to  the 
baseline scenario in terms of coherence. Under Option 3b broadly the same range of activities 
is  envisaged  as  under  the  baseline,  its  performance  in  terms  of  coherence  would  be 
comparable to the baseline. However, as with more budgetary resources more activities could 
be  sustained  over  time,  Option  3b  can  be  regarded  as  superior,  as  it  is  informed  by  the 
strategic  approach  outlined  in  the  SBA  review  of  February  2011,  which  is  unifying  the 
different measures on competitiveness and entrepreneurship of the proposed programme. This 
also provides a link to the promotion of the specific needs of SMEs across all EU policies and 
funding programmes. The mainstreaming of SMEs concerns is a key element to complement 
the  provision  of  dedicated  support  and  services  reflecting  the  particular  needs  of  the  SMEs 
community at European level.  

Moreover,  the  dissemination  of  information  on  legislative  initiatives  and  policies  of  the 
Commission relating to industrial and business activities provided by the Network is going to 
reinforce the link between any proposed programme and other elements of enterprise policies. 
For  instance,  SMEs  encounter  a  series  of  problems  with  respect  to  standards  and 
standardisation due to the amount of money and expertise necessary to follow highly technical 

EN 

51 

  EN 

 
matters  and  to  adapt  accordingly.  Modern  competitiveness,  SME  and  entrepreneurship 
policies will build on a balance between regulatory work and financial support. For example 
under the current programme, a promotion campaign was supported to raise awareness on CE 
marking  (mandatory  conformity  mark  for  products  placed  on  the  European  market)  and  its 
advantages among SMEs. 

Moreover,  it  will  be  important  to  ensure  effective  coordination  between  EU  and  Member 
State initiatives, on the one hand, and between different EU initiatives in related fields, on the 
other hand. All expansion options assume close co-ordination between EU level measures and 
those  carried  out  by  Member  States,  thereby  focussing  on  EU  added  value  and  minimizing 
overlaps.  For  example,  specific  EU  actions  to  support  SME  abroad  will  have  to  be  fully 
coordinated with the services provided by Member States and the Enterprise Europe Network. 
The China IPR SME Helpdesk, funded by the current programme, provides a “best practice” 
example of such coordination. Care was taken not to duplicate services normally offered by 
law firms or patents agents at the national level. As a consequence, this free-of-charge service 
provider was well received by Member States as an additional common instrument to protect 
IPR.  

8.4. 

Comparing the options according to the three dimensions 

The following table assesses the options against the criteria of effectiveness (How far would 
the  options  achieve  the  objectives  defined  in  chapter  5?),  efficiency  (How  cost-effectively 
would the objectives be achieved?) and coherence (How far would each option be internally 
coherent?). To facilitate comparison, a scorecard methodology has been used to evaluate the 
performance of the options. Based on the intensity of impacts, options have been ranked using 
a scale from (+) to (+++) for positive impacts and from (-) to (---) for negative ones. Table 4 
summarises the comparison of options across the three dimensions. 

Table 4 - Comparison of options 

Budget 

Effectiveness 

Efficiency 

Coherence 

Option 1 
(baseline) 

€213 million/year

0 

Option 2 

€0 million/year

- 

€340 million/year

--- 

++ 

- 

€340 million/year

- 

3b 

Option 
moderate 
expansion 

3c 

Option 
focused 
expansion 

0 

- 

0 

+ 

0 

--- 

++ 

-- 

Legend: (---) very negative, (--) negative, (-) slightly negative, (0) no change, (+) slightly positive, (++) positive, 
(+++) very positive 

Table  5  summarises  the  comparison  of  the  impacts  of  different  options,  taking  the  baseline 
option as the benchmark in relation to which other options are compared, in terms of impacts. 

EN 

52 

  EN 

 
 
Table 5 - Comparison of impacts 

Option 1 
(baseline) 

Option 2 

3b 

Option 
moderate 
expansion 

Budget 

Economic 

Social 

Environmental 

€213 million/year 

€660 million per 

year increase to 
GDP 

 €1.8 billion in 
lending/equity 
investment 

€200 million 
incremental 
turnover per year 

26,000 
assisted 

firms 

17,000  jobs  created 
and/or safeguarded 

900  new  products, 
or 
services 
created 
processes 
per year 

2011, 
By 
involvement  of  at 
least  7,500  SMEs  in 
more 
400 
than 
cooperation 
agreements 
signed 
with    environmental 
service providers. 

€0 million/year 

0 

0 

0 

- 

€340 million/year 

€500 million 
additional 
increase of GDP  

€1.7 billion in 
additional lending 
and equity 
investment 

13,000 additional 
firms assisted  

No change relative to 
baseline 

12,500 additional 
jobs created and/or 
safeguarded 

200 additional start-
up companies 
created 

3c 

Option 
focused 
expansion 

- 

€340 million/year 

€300 million 
additional 
increase of GDP 

5,300 additional 
jobs created and/or 
safeguarded 

No change relative to 
baseline 

€1.1 billion in 
additional lending 
and equity 
investment 

Option  2  clearly  fails  to  address  the  problems  of  competitiveness  and  entrepreneurship; 
discontinuation  of  the  programme  would  remove  the  EU  contribution  to  coping  with  the 
effects  of  the  economic  crisis  on  the  competitiveness  of  small  business  in  the  European 
economy.  

Option 1, although already proved to be useful, does not ensure the same economic and social 
impacts as Options 3b and 3c. The only realistic choice, other than maintaining the status quo 
of  Option  1,  is  between  Options  3b  and  3c.  Whereas  Option  3c  concentrates  the  budget  on 
two  measures  only,  Option  3b  attempts  to  strike  a  balance  between  different  initiatives,  in 
order to maximise the potential for added value of EU-level intervention across a wider field 
of  activity.  It  also  entails  a  relative  balance  between  the  different  financial  instruments. 
Option 3b, therefore, performs better in terms of achieving the programme’s objectives and of 
providing a coherent set of European support activities. Competitiveness means many things, 

EN 

53 

  EN 

 
 
 
 
 
and only concentrating resources on financial instruments and the Network would not do the 
job.  However,  a  wider  range  of  activities  does  not  come  without  a  price.  It  implies  higher 
staffing levels and therefore higher administrative costs. Moreover, the statistics and reports 
from the public consultation96 show support for all envisaged activities from well above 80% 
of respondents. 

As  it  offers  the  most  comprehensive  solution,  and  is  widely  supported  by  relevant 
stakeholders, Option 3b is the preferred option.  

9. 

MONITORING AND EVALUATION  

Due  to  the  diversity  of  actions  within  the  new  programme,  it  will  be  crucial  to  develop  a 
sound  monitoring  and  evaluation  system  to  check  that  implementation  of  the  future 
programme  is  on  track  and  to  record  progress  towards  the  achievement  of  its  objectives. 
Defining clear objectives and measurable indicators is a key requirement for all expenditure 
programmes and has to be set out in the ex-ante evaluation. This section  

–  summarises  the  lessons  learnt  from  implementing  the  EIP  and  highlights  shortcomings 

that need attention in the future programme; 

–  provides an outline of monitoring and evaluation arrangements for the new programme;  

– 

identifies principles for the proposed set of indicators which are developed and illustrated 
in Annex 15. 

9.1. 

Lessons learnt 

The  definition  of  indicators,  monitoring  and  evaluation  arrangements  for  the  proposed  new 
programme relies on two studies: (i) the final evaluation of the EIP, and (ii) the evaluation of 
the EIP indicators (hereinafter referred to as the “study on EIP indicators”)97. 

The  final  evaluation  of  the  EIP  found  that  considerable  progress  has  been  made  in  the 
development of a sound monitoring and evaluation system offering a valuable contribution to 
assessing the performance on an on-going basis. It formulated three recommendations: (i) the 
monitoring system should be further developed in some areas; (ii) data should be provided on 
a  regular  basis  in  an  easily  accessible  and  standard  format,  notably  in  the  implementation 
reports; and (iii) data should be presented more consistently.  

The  study  on  EIP  indicators  stated  that  the  system  in  place  allows  for  a  well-founded 
assessment  of  the  policy  implementation  against  core  evaluation  criteria  and  for  clear 
communication  of  the  policy’s  effects.  Despite  this  overall  positive  assessment,  the  study 
highlighted the following weaknesses: (i) indicators are too output-oriented and result/impact 
indicators are scarcely used; (ii) data are sometimes redundant and insufficiently coordinated; 
(iii) little consideration is given to the time dimension or context evolution over time; (iv) data 
is  sometimes  presented  in  a  haphazard  way  in  the  implementation  reports;  and  (v)  there  is 
widespread perception that monitoring provisions are complex.  

96  
97 

Available under HTTP://EC.EUROPA.EU/CIP/PUBLIC_CONSULTATION/INDEX_EN.HTM 
http://ec.europa.eu/cip/files/docs/eip_indicators_evaluation_finalreport_february2010_en.pdf 

EN 

54 

  EN 

 
                                                 
The  structure  of  the  EIP  monitoring  and  evaluation  system  is  judged  to  be  largely  viable. 
Taking account of the above studies, it will be further improved as outlined below. 

9.2. 

The new monitoring and evaluation system 

Monitoring  of  the  future  programme’s  implementation  will  be  ensured  by  the  European 
Commission  on  a  continual  basis,  directly  by  Commission  services  and  indirectly  by 
intermediaries  such  as  EIF  and  EACI.  The  Commission  will  draw  up  an  annual  monitoring 
report examining the efficiency and effectiveness of supported activities in terms of financial 
implementation,  results  and,  where  possible,  impacts  and  to  allow  for  any  necessary 
adjustments of the policy and funding priorities. Performance measurement will be subject to 
a  consistent  set  of  indicators.  In  addition,  periodic  stakeholders'  surveys  at  appropriate 
moments of the implementation cycle are envisaged. 

The monitoring and evaluation system would largely rely on that of the current programme, 
but the following improvements would be made to the data collection and analysis system, as 
well as to the evaluation and monitoring approach (following the recommendations from the 
evaluations of the current programme): 

– 

formulation of a new set of specific indicators and monitoring arrangements; 

–  cross-reference to Europe 2020 flagship indicators to steer the programme management 

process and to provide additional input to the Europe 2020 monitoring process; 

–  utilisation of counter-factual methodologies, comparing samples of beneficiaries with a 
similar set of non-beneficiaries, if relevant, and in order to distinguish the impact of the 
programme  on  the  proposed  indicators  from  the  effect  of  changing  economic 
circumstances.  

–  recourse to thematic evaluations across the various components of the future programme, 

where relevant.  

The monitoring system and the indicators used to assess the current programme have already 
been  the  subject  of  a  specific  external  study  and  of  the  EIP  final  evaluation.  The 
recommendations from these sources have been used to improve the monitoring of the current 
programme  which  will  run  until  2013.  Moreover,  the  recommendations  of  a  recent  IAS 
Performance  Audit  of  the  EIP  will  also  be  taken  into  account  in  the  implementation  of  the 
current programme and in the design of the monitoring system and of the indicators for the 
next  programme.  To  this  end,  a  Performance  Report  of  the  current  programme  is  currently 
being conducted. 

The  new  programme  will  be  subject  to  an  interim  and  to  an  ex-post  evaluation  to  assess 
progress towards the objectives and the results. The interim evaluation will be completed by 
end-2017  to  feed  into  the  preparation  of  a  successor  instrument  to  the  programme.  The  ex-
post evaluation will be undertaken within two years of completion of the programme. 

In the case of the Financial Instruments, the future monitoring and evaluation system will be 
based  both  on  regular  information  about  the  beneficiaries  collected  by  the  financial 
intermediaries and intermittent sample-based surveys that will cover some elements in more 
detail. Additional analyses will be carried out in the context of evaluations of the programme. 

EN 

55 

  EN 

 
In particular, such evaluations will compare the development of the beneficiaries with groups 
of enterprises not using the instruments provided. The latter will require a detailed analysis, 
since there are of course a number of factors that influence the development of an individual 
enterprise  which  need  to  be  distinguished  from  the  impact  of  the  programme.  The  most 
important aspects to be assessed in such an exercise are actually the growth and employment 
foregone because a guarantee  was  denied or a venture  capital  application turned down. The 
scope  of 
the 
internationalisation of enterprises. Data required for this purpose will be collected by means 
of  surveys,  on  a  sample  basis,  rather  than  through  regular  reporting,  in  order  to  avoid 
imposing a disproportionate burden on intermediaries and final beneficiaries. 

the  evaluations  will  also  be  extended  by  considering 

impacts  on 

9.3. 

Indicators 

The  monitoring  and  evaluation  system  of  the  future  programme  will  build  upon  a  robust 
hierarchy of objectives, with a corresponding set of indicators. The proposed list of indicators, 
both  qualitative  and  quantitative,  is  relatively  complex  as  indicators  vary  according  to  the 
action (see Annex 15). It should be noted that while some indicators are progressive to show 
the evolution of the programme, others are meant to be used only for an ex-post evaluation. 

Given the indirect nature of many of the proposed actions including the Network, it will be 
difficult to develop appropriate indicators to fully capture their impact. Extensive discussions 
with  Member  States  are  ongoing  to  tackle  this  inherent  design  problem  and  particular 
attention will be given to the deployment of indicators which could disentangle the impact of 
the programme activities from the general economic development.  

EN 

56 

  EN