A combination of loans for SMEs, bank rescue schemes and the implementation of the updated Late Payments Directive could help reboot Europe’s ailing economy, Philippe De Buck, director-general of BusinessEurope, told EURACTIV in an interview.
Philippe De Buck is director-general of BusinessEurope.
What are the major problems facing small businesses in Europe?
European SMEs are experiencing the full blast of the current crisis. There are still, of course, successful SMEs, but at the same time numerous otherwise viable businesses face bankruptcy. The problems are twofold and linked to the stages of the crisis: first financial, then economic.
First, SMEs’ access to affordable financing has been restricted. Due to banks’ higher risk averseness, credit standards have tightened substantially, making it hard for SMEs to find credit. Young and innovative SMEs, which are thought to pose a bigger risk, face even bigger problems. Their situation is complicated by further aspects of the crisis, such as the collapse of credit insurance and trade financing.
Fortunately, the business community, European and national policymakers are working on these issues. Let me mention just some of the important steps: the EIB and the EIF are providing loans and financing for SMEs, and national bank rescue schemes are helping to restore trust among banks.
BusinessEurope published recently a report on how to improve companies’ access to finance. On 8 April, the Commission adopted the recast version of the Late Payments Directive to combat late payments – especially by public authorities. If implemented rapidly and effectively in all member states, the directive could help SMEs to overcome their cash-flow problems.
Second, large manufacturers are hit by the crisis and thus cut back production. The problems are inevitably “passed down” through the supply chain. The situation is of particular concern in the automotive or chemical industries. With falling production, suppliers – often SMEs – experience a collapse of new orders and have to reduce production themselves.
As an economic recovery is unthinkable without strong SMEs, BusinessEurope will address the issue of how they are faring across Europe on 7 May in Brussels. We are organising an event entitled ‘How are you doing – SMEs in a larger Europe’, within the framework of the first European SME Week. Our discussions will focus in particular on ways that enable SMEs to better benefit from the internal market and ways to stimulate entrepreneurship as a response to the current crisis.
Are you concerned that Europe’s workforce does not have the right skills to embrace the knowledge economy?
European business places great emphasis on both external and internal labour flexibility, and on skills development. We are convinced that retaining skilled workers and developing skills are essential conditions for a swift economic recovery.
We strongly encourage entrepreneurs not to sit on their hands. It is more crucial now than ever to lay the foundations for future growth. They should make good use of the current situation and invest in training, skills and human resources.
We call for particular attention to investment in training and reform of education systems. Significant changes will occur, and people need to be equipped with the right skills to take advantage when opportunities arise.
Even in these times, if you ask businesses, you will hear that they consider the availability of skills as one of their biggest challenges. In many countries and sectors, companies cannot find much-needed highly skilled workers, such as engineers and IT specialists. This acts as a serious brake on economic growth and hampers competitiveness.
Is the EU recovery plan sufficient, or would you like to see more?
Impressive measures have been announced across Europe and huge amounts have been committed by member states and the Commission. We should now leave some time to see what effect these measures will have. Of course some member states might want to decide to do more, as the economic situation has deteriorated more rapidly. But there is no reason to call for more indiscriminate EU-wide spending.
Furthermore, it must be stressed that spending billions of euros alone will not cut the mustard. The measures must be coordinated and we must create positive spill-overs. This is the real challenge: how could coordination among national measures be better?
Are SMEs adequately catered for by the recovery plans?
Everybody is well aware of the important role SMEs play for our economy. Hence, measures adopted so far also benefit SMEs. Arguably their vulnerability is higher and hence they have specific needs. I have already mentioned the issue of late payments. It would be really great if national public authorities could adopt better behaviour when it comes to payment of invoices – irrespective of the directive published by the Commission.
Let me briefly mention here also that the need for an intelligent combination of flexibility and security (flexicurity) is even more important for SMEs than for large companies, especially in hard times.
What lessons have been learned from the banking crisis? Do you accept that much tighter regulation of the financial sector is required?
One of the most important lessons of the crisis is that transparency and accountability should be enhanced to avoid something like the current crisis ever happening again. One way of doing this is to improve regulation. What we need is better and smarter regulation; not overregulation. Better regulation will have to go hand in hand with allowing room for financial innovation. In this way, emerging and innovative firms will have access to finance again. Let us not forget: these new instruments often constitute a central element of corporate finance.
Everyone is talking about sustainability and creating ‘green jobs’. Is this a genuine acceptance that environmentally-sound practices are good for business, or is industry just responding to the public mood?
It is far from ‘just responding to the public mood’! Business is crucial in meeting the climate change challenge. Combating climate change is in many ways a technology and innovation challenge. Many European companies have understood the enormous opportunities and strive to be global leaders in climate protection solutions. The economic crisis has not changed our commitment to the EU climate protection targets. But it is even more important to look at the competitiveness issue now!
Resource efficiency is a survival issue for companies, and European companies have improved their energy efficiency by 24% since 1997. This surely has to do with relatively high energy prices in Europe compared with other economic regions. It also reflects the fact that companies are adapting to the emissions trading scheme, which came into force in 2005. But it also has to do with a vision by many European companies of a low-carbon future, which they have integrated in their long-term business strategies.
A fundamental question, especially in the current crisis, is how to provide the funding for business to innovate and invest in cleaner technologies. On the one hand, it is important not to overburden industry with taxes and charges. Incentives to produce more efficiently will free resources in investment. This also means that low-cost and low-carbon energy sources must be used. I would not exclude for example nuclear energy at all.
I am just wondering: if we phase out the use of nuclear energy and shut down all the nuclear reactors in Belgium would it be possible to build enough wind turbines along the short Belgian coastline or in the Ardennes to compensate for the energy shortfall?
I should add something else here: European industry and energy sectors account for only 6.5% of global emissions. Solutions to climate protection must stretch across all sectors and regions. Households, services, transport and agriculture represent large reservoirs for CO2 savings in the world. In the EU, buildings could achieve 30% less energy use in a cost-effective way. This equals an 11% reduction in the EU’s final energy consumption. However, energy use in this sector continues to increase.
Finally, should Europeans work longer (i.e. retire later) than they do now? For this to h
appen, what needs to be done in terms of education and health policy?
Yes, the workforce is shrinking and ageing. According to the 2009 Ageing Report of the European Commission, the workforce in the EU is projected to shrink by about 19 million people by the year 2060, in spite of an increased labour market participation rate. It is expected that the EU will move from having four working-age people for every person aged over 65 to a ratio of only two to one. This makes clear that in the large majority of EU member states people will have to work longer than they do now if we want to sustain our social security systems.
We will not only have to work longer, we will also have to increase the number in employment and increase labour productivity. The crisis should not lead us to lose sight of the long-term challenges facing our social systems. Ageing is probably the most important structural change in this respect. If we want people to work longer and work more productively, education clearly will play a crucial role. Individuals must have the skills enabling them to stay longer on the labour market through lifelong learning and continuing training.