The Ecofin deceives the SMEs with the EIB €10bn capital increase

The Ecofin Council prepares to start it’s October meeting in Luxembourg, on 15/10/2013. (The Council of the European Union Photographic Library).

The Ecofin Council prepares to start it’s October meeting in Luxembourg, on 15/10/2013. (The Council of the European Union Photographic Library).

Shakespeare’s comedy play title “Much Ado About Nothing” best describes the 28 Ecofin ministers for Finance discussion on the EU Commission and European Investment Bank initiative, wishfully aimed at facilitating the access to finance for SMEs. The programme extends over the next few years and foresees an increase of EIB’s capital by €10 billion. This money is to allegedly help EU’s disadvantaged SMEs to get access to finance. The Ecofin decided that “Preparations are being made to allow the new instruments to start operating in January 2014, at the start of the 2014-20 programming period for the structural funds”.

The whole affair is about a decision by the European Summit of the 28 EU leaders taken last January. The subject matter of it is, that the €10bn increase in the EIB’s capital will “enable it to provide over a three-year period up to €60bn in additional lending to projects in support of growth and employment”. Hypocrisy and wishful thinking deeply permeates this affair.

Curing all woes with €10bn

For one thing, the €10bn capital increase will be magically inflated to €60bn, by a guarantee and possibly a securitisation instrument yet to be decided and already criticised for sloppiness and misconception of market realities. As for the time span, it is only theoretically restricted to three years, because the new initiative will be embedded in the “2014-20 programming period for the structural funds”.

It’s impossible without extra guarantees to securitise south Eurozone SMEs loans and expect the market to buy them at face value or close to that. Understandably, since no such extra guarantees are being provided, the estimate that the €10bn are to mobilise €60bn in EIB loans, is more that wishful thinking, it’s almost a deception.

Consequently the annual impact of the initial €10bn may be reduced to €1.42bn yearly. With this kind of money the 28 leaders want to “encourage banks and other financial institutions to increase the lending for the benefit of SMEs,” as the Lithuanian minister of Finance Rimantas Šadžius, immoderately observed in the Press conference after the Ecofin council. Not to forget that there are more than 20 million SMEs in the EU, representing 95% of businesses and offering 85% of new jobs in the 28 member states.

Deceiving 20 million SMEs

For all those 20 million of SMEs the European Union can’t spare more than €1.42bn a year. It’s really a ridiculous affair, because this Commission and EIB initiative will be given a great career by being presented in the European Council meetings of 24 and 25 October. The reason is that the 28 leaders will happily endorse the initiative, and then return to their countries and advertise that they have just set aside €60bn for the SMEs. Of course this announcement may secure some more votes for their political parties and add some percentage units in their poll ratings.

It’s not only that. The Press release issued after the Ecofin meeting disclosed that “The timetable for the programming of national allocations from the (structural) funds is therefore tight”. The meaning of this is that the €10bn will be allocated to member states according to the “common provisions applicable for the EU’s structural and investment funds for the 2014-20 period”. In short, the money will be divided to all member states which receive EU aid from structural funds. Consequently, some of this money will be directed probably to Germany, Austria, France, probably Britain and other core EU wealthy countries.

At this point it has to be reminded that only the SMEs of the crisis stricken countries in south of Eurozone, are actually cut off from bank credits. Their counterparts in the core of the EU have no problem whatsoever to secure bank financing for sound business plans. On the contrary, the SMEs in south Eurozone, even the well-established of them and, though being competitive, have no access to credit.

At similar business risks compared to their counterparts in core Eurozone members like Germany and France, the small enterprises in the south, when they finally find bank credit they have to pay at least the triple interest rate costs. This is the famous fragmentation of Eurozone’s financial market, that everybody considers as the major impediment to growth and the EU’s economic unification.

It must also be noted that the European Central Bank has set as its main target to fight this fragmentation and reduce it to levels warranted only by structural reasons. The governments of south Eurozone countries, more so the Italian one, recognise that this fragmentation has developed into a major disadvantage in maintaining let alone increasing the well- being of their citizens. In this way their participation in the single euro money area has become an unbearable burden. This issue is so important that came to constitute the major friction point between Germany and the south EU member states.

Obviously the financial fragmentation of the Eurozone cannot be fought with illusions, like this Commission and EIB initiative. It needs much more than that and the ECB has acknowledged it as the major impediment in the transmission of its monetary policies to all Eurozone member states. As a result, this ECB policy provides abundant and cheap loans only to SMEs of the core Eurozone countries.

It is then, certainly a deception that those €10bn will heal the illness of south Eurozone countries.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

MEPs urge UK to break current deadlock

China will be the world’s top tourist destination by 2030

What business leaders can learn from jazz

Parliament sets conditions on EU-China investment deal

Antitrust: Commission consults stakeholders on guidance for national courts when handling disclosure information

EU and World Health Organisation team up to boost access to health services in developing countries

Nigel Farage and Boris Johnson: who forced the two ‘brave’ Brexiteers to quit?

Online shopping across the EU to be easier from 3 December

EU Elections: new rules to prevent breaches of data used to influence elections

Cloud computing under scrutiny in the EU?

What could a no-deal Brexit mean for developing countries?

Right2Water initiative: Is the Commission ready to listen to citizens?

OECD leading multilateral efforts to address tax challenges from digitalisation of the economy

Sexual abuse of elderly likely to ‘grow dramatically’, UN expert says

EU’s Finance Ministers draft plan to raise tax bills of online giants like Google and Amazon

UN ceasefire monitoring chief tours Yemeni port of Hudaydah

Deepening Europe’s Economic and Monetary Union: Commission takes stock of progress

Gender Equality as a platform to improve Medicine

Every bite of burger boosts harmful greenhouse gases: UN Environment Agency

The Commission neglects the services sector and favours industry

Prisoner executions in Belarus ‘simply unacceptable’, says UN rights body

Ocean life faces ‘onslaught of threats’ from human activity, but tools exist to save it

FROM THE FIELD: Faces and Voices of Conflict

Primary Health Care: in a world of specializations

State aid: Commission approves €380 million German rescue aid to Condor

Financiers can turn the world into a dirty and dangerous place

Is it impossible to place the banks under control?

Why banks escape from competition rules but not pharmaceutical firms

MEPs back plans to promote water reuse for agricultural irrigation

World response to AIDS epidemic at a ‘critical juncture’

2nd Global Consultation on Migrant Health 21-23 February 2017 in Sri Lanka

Air pollution could be responsible for 1 in 7 new cases of diabetes

Discussion at Europe House: Brexit & Food

Spirit unlimited

How UN cultural treasures helped set the stage for Game of Thrones

Hunger, displacement and disease: 4.3 million people remain in dire need of aid in Chad

EU to negotiate an FTA with Japan

Half the population of Yemen at risk of famine: UN emergency relief chief

Madagascar: UN chief commends leaders, State institutions following ‘historic milestone’ election

EU Court of Justice invalidates Safe Harbour and the game for thousands US businesses suddenly changes

It’s time to ditch our obsession with trade deficits. Here’s why

COP21 Breaking News_08 December: Cities & Regions Launch Major Five-Year Vision to Take Action on Climate Change

Who holds the key to the future of biotechnology? You do

Utmost hypocrisy emitted by EU’s energy regulation

European Parliament approves more transparency and efficiency in its internal rules

The health of the human being in coexistence with a transformative biosphere

How biotechnology is evolving in the Fourth Industrial Revolution

These are the cities where people work the longest hours

EU budget 2020: Commission focuses its proposal on jobs, growth and security

Why Nordic nations are the best places to have children

Britain and Germany change attitude towards the European Union

Mandela, ‘true symbol of human greatness’, celebrated on centenary of his birth

Four ways innovation can help to beat heart disease

EU is now giving Google new monopolies to the detriment of European citizens and Internet companies

Take action on air pollution to save lives, and the planet, urges UN chief

European Union disenchanted with Turkey

Christmas spending: Who can afford not to cut?

Entrepreneur India Convention 2016: Bringing together Entrepreneurs, Investors, Startups and SMEs

6 ways to ensure AI and new tech works for – not against – humanity

How digital remittances can help drive sustainable development

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s