False promises to Small and Medium Enterprises

General view of the meeting with the national SME Envoys in Bologna, in the presence of Antonio Tajani, Vice-President of the EC seated, 5th from the left, and Daniel Calleja Crespo, Director of the DG “Enterprises and Industry” of the EC and EC’s SME Envoy seated, 6th from the left. (EC Audiovisual Services 8-2-2013).

After the minimal or zero success that the Small Business Act (SBA) of 2008 had recorded during the past four years, in failing to ease the life of Small and Medium Enterprises, the European Commission launched yesterday another similar initiative. This time the “Commission wants to simplify life for SMEs by easing the top 10 most burdensome EU laws”, as it is stated in an announcement of 7 February. How to do that? Just by counting the disincentives through an opinion poll, baptised consultation! The Commission usually takes refuge to such options, when it is impossible to confront the real issues.

To substantiate the negative criticism of the SBA, one suffices to recall that its main target was to “facilitate access to finance for SMEs”, as stated in a Commission’s report to the Council and the European Parliament (23.11.2011 COM(2011) 803 final). As a matter of fact though, after 2008 the SMEs were the first victims of the financial crisis. Not only there was less, not more, bank credit to SMEs but in many countries like Greece, Italy, Spain, Portugal and Ireland they had a really bad time for many and obvious reasons.

Every day thousands of SMEs are disappearing for ever, after the Commission introduced to the above mentioned countries, a large number of business-killer measures, under the programmes of draconian austerity. Still the Commission embarks once more on a task, with the sole aim to caress the ears of tens of millions of Small and Medium Entrepreneurs.

This is a real show-business initiative meant to impress tens of millions of voters. Unfortunately what traditionally hurts the SMEs (bureaucracy, taxation, environmental rules) cannot change and as if this was not enough, the Commission has loaded the cost of the credit crisis on the shoulders of the real economy, that is the small and the very small businesses.

The ‘consultation’

As a matter of fact in the context of this recent Commission ‘consultation’, 1000 SMEs and business organisations have identified as the most burdensome EU laws, the VAT (taxation) and the REACH (chemical) regulations. It goes without saying that any change on both those fronts is unthinkable. On the first issue, VAT is an ‘untouchable’ policy domain needing unanimity for the smallest changes, while the REACH regulation still needs some time to be fully applied. In short, on both those fronts, taxation and environment, any relaxation of regulations and controls to make the SMEs happier, is politically out of question.

All that despite the reality that small and medium-sized enterprises play a key role in shaping Europe’s economy, accounting according to the EU Commission for 99 % of enterprises, of which 92 % are micro-enterprises. They provide more than two thirds of private sector employment and play a key role in economic growth. They have a crucial importance to the European economy as employers and sources of innovation.

The 20.8 million European small and medium sized enterprises create 85% of all new jobs in Europe, they employ 2/3 of the workforce in the EU and they contribute significantly to innovation and growth. From those facts it can be deducted that the SMEs create more jobs than the rest of the business sector, simply because while employing 66% of the labour force they create 85% of new jobs.

Let’s follow the Commission in its new project in ‘favour’ of the SMEs. According to yesterday’s announcement, “The purpose of this broad consultation was to check where EU regulation might be impeding jobs and growth and to identify areas or issues which would require further examination and action where necessary. The result published today indicates that SMEs see the biggest difficulties and costs as a consequence of the rules regarding the REACH chemical legislation, value added tax, product safety, recognition of professional qualifications, data protection, waste legislation, labour market related legislation, recording equipment for road transport, public procurement and the modernised customs code”.

To present this public relations ‘consultation’ with 1000 SMEs and their organisations, the European Commission Vice-President Antonio Tajani, responsible for Industry and Entrepreneurship, was not enough to carry the weight alone. The President’s presence was required. So José Manuel Barroso didn’t lose this opportunity to speak. So he said that: “The Commission is making sure that EU legislation is fit for purpose and helps European businesses to grow and to create jobs. This is why we have put smart regulation at the heart of our policy-making. And this is why we want to ease the lives of our small and medium sized enterprises, which are most important engines for Europe’s economy”.

Seemingly the Commissions expertise to state the obvious and promise the impossible has developed to high performance levels.