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.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

China Unlimited: an exclusive interview with the former Ambassador of Hungary to China

Healthcare workers’ safety: a forgotten necessity

Understanding the ‘second brain’ in your gut

5 things to know about the exploding world of pro gaming

First EU-wide protection for whistle-blowers agreed

The EU has to prove it can remain one piece

These 8 countries have perfect scores for women’s rights at work

International Women’s Day: Where does she belong?

Africa-Europe Alliance: European Commission committed to a sustainable African agri-food sector

4 things ISPs can do to reduce the impact of cybercrime

Trump ‘used’ G20 to side with Putin and split climate and trade packs

State aid: Commission opens in-depth investigation into arbitration award in favour of Antin to be paid by Spain

Vile act of torture prohibited ‘under all circumstances’, UN chief affirms on International Day to support victims

3 ways to ensure the internet’s future is creative, collaborative and fair

This lethal fungus is threatening to wipe out the world’s bananas

EU food watchdog: more transparency, better risk prevention

New rules on drivers’ working conditions and fair competition in road transport

Help African farmers cope with climate change threats, UN food agency urges

Why cybersecurity matters more than ever during the coronavirus pandemic

Europe eyes to replace US as China’s prime foreign partner

3 ways to make technologies more inclusive for people with disabilities

Confidence in the COVID-19 vaccine grows in UK and US, but global concerns about side effects are on the rise

Preventing and resolving conflicts must form ‘backbone’ of collective efforts – UN chief

UPDATED: Thousands flee fighting around Libyan capital as Guterres condemns escalation, urges ‘immediate halt’ to all military operations

How emerging markets will shape Africa in 2020

5 factors driving the Chinese lawtech boom

This tool shows you which cities will flood as ice sheets melt

High-tech or ‘high-touch’: UK survey gives clues to the jobs of the future

Security Council urges ‘maximum restraint’ around Gulf region as Iran and United States trade diplomatic blows in New York

EU Parliament says ‘no’ to austerity budget

ISIS fighters fleeing Mosul for Syria can topple Assad. Why did the US now decide to uproot them from Iraq?

China and China-EU Relations in the New Era

5 things you might not know about forests – but should

More hiring freedom can reduce teacher shortages in disadvantaged areas

When it comes to envirotech adoption, NGOs can lead us out of the woods

‘Extinction crisis’ pushes countries to agree stronger protection for global wildlife

Why we need both science and humanities for a Fourth Industrial Revolution education

The digital transformation is a skills and education opportunity for all. Companies must use it

European Commission increases support for the EU’s beekeeping sector

Building a Climate-Resilient Future – A new EU Strategy on Adaptation to Climate Change

The UK option: An overarching alternative for the whole Brexit options

‘The time for action is now’ senior UN peacekeeping official says, urging support for regional force combating Sahel terrorism

Mediterranean migrant drownings should spur greater action by European countries, urge UN agencies

Carbon levy on EU imports needed to raise global climate ambition

Iran: women hunger strikers entitled to medical care, UN rights experts urge

It is now the era to evolve mutually as the bacteria do

COVID-19: Revised rules to encourage banks to lend to companies and households

Fashion’s hot new trend: clothes you don’t need to wash (very often)

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

Republic of Korea President proposes DMZ as future ‘peace and cooperation district’ on Peninsula

Women’s work faces the greatest risk of automation, says new research

May led Britain to chaos, now looks for way out with unpredictable DUP

We must rethink and repurpose cybersecurity for the COVID-19 era

EU-Turkey relations: EU considers imposing sanctions while Turkey keeps violating Cyprus’ sovereignty

National parks give a $6 trillion boost to mental health worldwide

Here’s how data can shine a light on financial crime

Will Eurozone be able to repay its debts? Is a bubble forming there?

Eight years in, Syria still embroiled in conflict ‘that no longer sparks outrage’, Security Council hears

Difficulties of vaccination against COVID-19

Services are the hidden side of the US-China trade war

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