Verheugen: ‘Everything in the SBA is negotiable’


All measures in the recently proposed Small Business Act (SBA) are “negotiable”, including one on a reduced rate of VAT that is strongly opposed by several member states, Commission Vice-President responsible for enterprise Günter Verheugen told EURACTIV in an interview.

Günter Verheugen has been the vice-president of the European Commission responsible for enterprise and industry since 2004. He previously served Romano Prodi as enlargement commissioner, paving the way for the accession of ten new member states to the EU. 

To read a shortened version of the interview, please click here

The Small Business Act (SBA) was high on the agenda of the last EU Competitiveness Council on 24-25 September. How likely is it that the French will reach agreement on this before the end of their EU presidency? 

The French Presidency attaches the utmost importance to the SBA. Moreover, our proposals were warmly welcomed at the recent Competitiveness Council. Therefore I am confident that the heads of state and government will strongly back the need to firmly anchor the ‘Think Small First’ principle in the EU. Given the economic outlook and the uncertainties in the global economy, it is even more urgent to fully free the potential of small and medium-sized businesses. 

The proposal on a reduced rate of VAT for small businesses has encountered strong opposition from several member states. Would you sacrifice or at least modify this proposal for the benefit of getting an agreement among all 27 EU countries? In your view, which measures are non-negotiable? 

It was clear from the very beginning that our VAT proposal would not be uncontroversial. However, all the available information shows that reduced VAT rates for labour-intensive services have a strong potential for job creation and that in the medium term, the overall budgetary impact can be positive. So I am optimistic that those who are still reluctant will be persuaded. Everything in the SBA is of course negotiable, and I would welcome all suggestions that aim to further enrich it. What matters most is lasting improvement of the framework conditions for SMEs in the EU. 

Why has the Commission not proposed the SBA as a binding legal act, as demanded by business organisations? 

SME policy is typically designed at municipal, regional and member-state level and the conditions and challenges SMEs face are rather different. Moreover, SMEs are by nature very different, ranging from family enterprises to microenterprises. As a result, a one-size-fits-all policy approach would not address their particular needs and concerns. Whoever believes that European legislation would do it is ignoring the reality within the EU. 

Instead, what is necessary is to bring all actors on board, based on a shared policy commitment and in close partnership. I know that this approach is also supported by business organisations.

The SME federation UEAPME just put forward a proposal for an inter-institutional agreement on the SBA between the Council, Commission and Parliament. Is this a realistic objective? 

My good friend A. Benassi has indeed thought about this. However, as I understood him, he has reconsidered whether a new inter-institutional agreement (IIA) would add value for SMEs in the EU. But clearly, there is an issue of fully implementing existing IIAs to fully achieve our objectives with the SBA and I am grateful that UEAPME has drawn our attention to it. 

Businesses have stressed that the key issue now is implementation by member states. Presuming that agreement is reached by December, what timeframe do you envisage for the introduction of the measures? 

Indeed, now it is time to deliver. We have to make the EU a world-class environment for SMEs. Therefore I already invited the national Lisbon coordinators at our meeting in May to step up their SME policies. We will look into it this year and will report in December as a part of our annual reporting on the Lisbon strategy for growth and jobs. As you know, it is then the spring European Council in 2009 that evaluates the progress achieved and takes the necessary decisions. 

I also would like to mention the valuable contribution of the EIB to the success of the SBA. We announced it in the SBA before the summer break – now, as early as September it is clear that SMEs will benefit from a very substantial increase of money. As you see the implementation has already started! 

The SBA adds to a multitude of previous instruments that have already been in place for years, such as the Lisbon Strategy and the ‘Competitiveness and Innovation Programme’. Yet despite all these measures, the EU continues lag behind the US in terms of economic productivity. What are the chances of the SBA actually managing to bring about a change in this regard? 

I should perhaps clarify the situation first: since 2005, the EU has been giving itself a focused reform strategy via our Lisbon partnership for growth and jobs. It concentrates on essential reform needs to enhance our global competitiveness and to provide for sustainable growth and more and better jobs. Since the very beginning, it has been clear that the goals will not be achieved overnight but will need a lasting reform effort at the European level and in the EU’s member states. 

Nobody should deny that substantial progress has been made since then, while it is equally true that a lot still remains to be done. SME policy has been one of the key elements of the Lisbon Strategy and we have again strengthened it with the SBA. If you analyse the policies of member states, you will see that the crucial role of SMEs for our employment situation is well understood. Indeed, unlocking the entrepreneurial potential in the EU is a very efficient means of reform, with lasting benefits for society. 

Cutting red tape is one key element of the SBA but also one of the Commission’s key priorities. How satisfied are you with the work conducted by the high-level group chaired by Edmund Stoiber and are you still confident of meeting the objective of reducing the administrative burden by 25% by 2012? 

Businesses consider this goal not ambitious enough. I am most satisfied with the work of the independent expert group, which was set up at the request of the European Parliament. This group helps us to confirm the most promising reduction potentials. Very recently, it encouraged us to substantially cut red tape in the area of company law. I recently had a meeting with Edmund Stoiber and we both have no doubt that in the months and years to come the group will crucially contribute to achieving our 25% administrative reduction goal. 

The Community patent is another French priority. Do you expect any progress in the coming months or even an agreement to be struck by the end of the year for which some have hoped? What was the progress made under Slovenian Presidency? 

Patents are a crucial element in the promotion of innovation and growth and are of crucial importance for SMEs. The fact is that the accumulated cost of filing and maintaining patents in the European Patent System or individually in many EU member states are still much higher than for our major competitors, and this constitutes a clear competitive disadvantage. 

I am therefore very grateful for the impressive work of the Portuguese and Slovenian presidencies, which prepared the ground for a possible consensus. There is a package now on the table that is being discussed at both, political and technical level. Yes, I do have hope that a solution can be found. 

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