The European Investment Bank (EIB) is ramping up its support for small and medium-sized enterprises (SMEs) by making up to €30 billion available over the next three years and providing technical assistance to microfinance institutions.
EIB President Philippe Maystadt said loans would be given to banks, which would then pass credit on to small businesses. He said SMEs have been hardest hit by the current downturn and jobs are in jeopardy due to the lack of credit available from banks.
Speaking at a meeting on microcredit schemes, organised by the European Parliament's committee on economic and monetary affairs, Maystadt said the EIB had been asked by member states to prioritise SMEs, and this prompted the bank to devise new lending products.
"The bank already lends between €5 billion and €6 billion to banks for SMEs each year, and has now committed to lending €30 billion between 2008 and 2011. In 2008, €8.5 billion was given to banks across the EU, €5 billion of which was spent in the last quarter of the year as a response to the enfolding economic crisis," he said.
However, an initial attempt to establish a European Microfinance Fund had not attracted sufficient funds from member states due to "a lack of solidarity" and governments' insistence on attaching strict conditions to money they lend, he added.
Maystadt insisted the new scheme is not aimed at increasing the liquidity of banks, but would encourage financial institutions to loosen the supply of much-needed credit to SMEs.
To mitigate the risks taken by banks in lending to businesses, the EIB will take on half of the risk, thus reducing the capital requirements of lending institutions.
He told the seminar, which was attended by MEPs and national parliamentarians from across Europe, that banks can also use the funds for "intangible" investments in research, distribution and patents.
In addition, the EIB would make technical assistance available to microcredit institutions to help them become more professional and make larger banks less hesitant to lend.
"None of this forces banks to lend to SMEs. We try to make clear to banking partners that only those who make quick use of funds will be supported in future because our aim is to make credit available quickly," he concluded.
Portuguese Socialist MEP Elisa Ferreira said the EU seems to be calling on the EIB a great deal, but questioned whether the bank would achieve its objectives by lending through commercial banks.
Andreas Lämmel, a member of the German Bundestag, expressed concerns that the level of funding made available by the EIB would become a burden on future generations. "All of these loans are either new debts or amounts to be paid by the taxpayer. Incurring public debt is laying the foundation for the next financial crisis."
Hungarian MEP Zsolt Becsey (EPP-ED), rapporteur on a parliamentary report calling for legislation on microcredit schemes, said microcredit should be defined differently from SME credit. "Microcredit refers to loans extended to specific social groups such as women, immigrants, or the Roma Community. These are people who may have no collateral to offer, but are willing to work and want to start businesses. We are talking about businesses with 0-9 employees."
Jouko Skinnari, a member of the Finnish parliament, or Eduskunta, said the challenge was to get the money to where it is needed and to do so quickly. "It is also important to ensure this new funding is not controlled by people who created the problem."
French Socialist MEP Pervenche Berès warned of growing US protectionism, saying it would have negative long-term consequences for global trade. "We must act in parallel at national, European and international level. The very foundations of the EU – the internal market and competition – will all be jeopardised if we don't fight protectionism."
Nuno Da Câmara Pereira of the Portuguese parliament's committee on economic affairs said Europe had failed to adopt a concerted approach to the primary sector. "Europe has focused on investing in services instead of production. Without the primary sector, we don't have an economic system."
Vytenis Povilas Andriukaitis, deputy chairman of the committee on European affairs in the Lithuanian parliament, or Saeima, said national recovery plans should be analysed carefully to guard against protectionism. He was critical of France's "over-the top protectionism," warning it could have negative consequences for the EU.
Bulgarian MEP Mariela Velichkova Baeva (ALDE) suggested more funding should be directed towards energy links, saying Bulgarian citizens might not have been hit so badly by the Russia-Ukraine gas dispute if the country had been better connected with Romania.
EU Economic and Monetary Affairs Commissioner Joaquín Almunia urged the Parliament to support the use of €5 billion unspent funds to protect and create jobs. He said up to eight Ecofin (Economic and Financial Affairs Council) ministers had blocked the spending package.
He also revealed that the Commission is finalising a proposal to regulate ratings agencies. This would include a register of all agencies active in Europe. "They must explain how they reach decisions and be open about potential conflicts of interest." He called on ratings agencies not to overcompensate for past mistakes by being overly strict in rating national debts.