Christophe Leitl is honorary president of Eurochambres, which represents EU chambers of commerce.
He was speaking to Gary Finnegan.
To read a shortened version of this interview, please click here.
Do you foresee an uneven recovery, with some member states returning to growth long before others?
The process and speed of economic recovery after probably the worst crisis modern economies have seen will depend on the behaviour of market participants – governments, companies and consumers. In this setting, the features of each national economy as well as the effects of international cooperation will play a key role.
Also, consider the differences in national growth rates before the crisis, in their competitive advantages and disadvantages – labour market conditions, levels of debt, investment and innovation rates, taxation, etc. – in the levels of stability of financial systems and banks, and in the extent of rescue packages. These factors are a natural source of an uneven recovery regarding the magnitude of growth amongst nations.
But more importantly, there will be a positive symmetry in timing and momentum. This will be of mutual benefit. Some policy stimulus will continue to be needed in the near term. Nonetheless, those nations investing sufficient resources in dynamic growth drivers such as education, innovation and social sustainability – while not overburdening the public purse and with an obvious commitment to free-market economics and international openness – will lead the way.
Do you believe that credit for businesses is becoming easier to access?
Even if the first signs of an economic recovery are emerging, SMEs in particular are still suffering from limited access to finance. According to a recently published survey by the ECB, 33% of SMEs report a deterioration in the availability of bank loans in the last six months, and 12% reported having failed completely when applying for a loan. 17% say that access to finance is currently their most serious problem.
I therefore demand an EU Guarantee Fund for SMEs that provides re-insurance for national and regional guarantee institutions. Due to the leverage effect, a multiple of the guarantee volume could be generated as new loan volume. The volume of the Fund should be €1 billion, which means that new loans of up to €50 billion could be generated in the EU. At the same time, member states should commit themselves to using this new instrument and therefore establish new guarantee programmes that are directed especially at small and micro enterprises and offer guarantees for €5,000 of loans or equity per SME, which would mean that 10 million SMEs all over Europe could benefit from this new instrument.
Additionally, immediate regulatory action to mitigate pro-cyclical effects of the equity directive, Basel II, is necessary. It is likely that pro-cyclical effects of Basel II will have a negative effect on the availability of loans to Europe's businesses in the coming months. I have the impression that many policymakers, including the Commission, are not really aware of this danger. Choosing a 'let's wait and see' approach is not an optimal strategy in times of crises.
In Austria, we have already given a good example by agreeing to extend the period for measuring creditworthiness by two to three years. We cannot abolish Basel II but we must work together to avoid a credit crunch.
Outgoing Enterprise Commissioner Günter Verheugen seems broadly popular with business groups, partly due to his introduction of the Small Business Act. What should the next European Commission's priorities be?
The European Small Business Act has the potential to really change European SME policy. I emphasise the need for a strong personality to fight for better SME framework conditions, as Vice-President Günter Verheugen has done the last five years.
SMEs are suffering most from the current crisis. They should get all the help they need. But also when the crisis is over, SMEs should not be left behind. All policies should be made in view of the needs and demands of small enterprises. SMEs are the backbone of our economy, so it is only logical that we need a strong EU commissioner to take care of SME issues. The Small Business Act was only the first policy step.
The next Commission's priorities should be: a further development of the Lisbon Strategy for Growth and Jobs taking into account the new challenges, the creation of an enterprise-friendly environment and completion of the single market, reduction of administrative burdens, reform of financial market regulation and improving business financing.
Looking at general trends in business, most stakeholders are currently emphasising the importance of SMEs in the economy, but do you think larger companies are crowding small firms out of some markets, such as food production and retail?
Of course politicians, scientists and other stakeholders do highlight the importance of SMEs in the economy, and they are perfectly right to do so – SMEs can help stabilise the European economy in the current crisis. SMEs do not lay off their staff that easily and they try to get through this crisis utilising their outstanding flexibility.
But larger enterprises also have the right to grow and to reap the benefits of economies of scale, which at the same time are often offset by the handicap of bureaucracy. We have to bear in mind that competition is at the core of prosperity. We must take care that overwhelming regulation, standardisation and certification do not drive SMEs out of the market because of unbearable compliance costs.
Has it become tougher for family businesses to survive than in the past? Is there a problem with succession? Is it less common for a family business to be passed on to the next generation?
'Succession in SMEs', a survey recently conducted by SME Research Austria, shows that 57,500 Austrian companies with up to 500,000 employees will be in need of a successor by 2018. Every year successor companies and start-ups create and secure 100,000 jobs. The survey shows a significant change in succession since 1996. A constantly rising number of companies, at the moment about 50%, have successors from outside the family. In 1996 this number was at 25%. So it is indeed less common for a family business to be passed on to the next generation.
The Business Start-Up Service of the Austrian Federal Economic Chamber provides useful assistance in order to guarantee a smooth takeover of a company. It explains the central problems of a business takeover in a practice-oriented way and the Business Start-Up Service also provides an online Market place for succession.
The biggest challenges for the owner of a company are to find a suitable successor – more and more often from outside the family – to plan the process carefully and in time, and to sell the company or the shares at an adequate price. The three biggest challenges for a successor are to find a suitable company for takeover, to analyse its economic situation and to harmonise one's own plans with the existent operational concept.
You launched Erasmus for Entrepreneurs. Is this a response to your concerns over the fact that SMEs in Europe seem less inclined to exploit the internal market?
To exploit the internal market means to have access to a bigger market than only the home market. The success of Austrian SMEs since the late 1980s was a clear consequence of the opening up of markets – the fall of the Iron Curtain, EU accession and EU enlargement. But much is left to be done, because national regulation still creates borders for SMEs, for example by excessive regulation of construction products, by a hesitant opening of the services markets, and of course by different languages, cultures and legal traditions.
In this respect, Erasmus for Entrepreneurs could lead to more openness for foreign cultures and markets, but this must be accompanied by a clear simplification of the legal framework regulating cross border business in the EU.
Finally, some have complained that European SMEs find it difficult to access foreign markets, including the growing Chinese market. What can be done to make it easier for innovative businesses to tap into this huge foreign market?
Most importantly, a market entry has to be well prepared. This is true not only for China, but also for all foreign markets. A market entry in China is especially tricky as many regional disparities have to be considered. China is not only one market with 1.3 billion customers, but many regional markets with not only provincial regulatory framework, but also different client and customer requirements, buying power and cultural background.
Furthermore, despite the great economic achievements of China during recent years, it is still a developing country in many ways. Legal transparency, insufficient protection of intellectual property rights and corruption can still be problematic. In addition international and local competition is increasing constantly.
However, when well planned, the Chinese market holds great opportunities for European SMEs, especially when tapping the Chinese sales market. The Austrian Trade Commissions in China are more than happy to support Austrian businesses with all their China activities. Additionally there are many funds in place to support SMEs financially.
