SMEs: A Solution from Europe

Today, no one disputes that credit is vital for small and medium enterprises. Despite the momentum that big businesses give to our economies, SMEs are still the basis of the Spanish productive sector and the ones employing the majority of citizens in Spain and in Europe. With the crisis, the challenges facing SMEs have become more pronounced. Not only because of the drop in sales as it is the case for other companies, but because of major difficulties in accessing credit. A few years ago, almost any solvent SMEs in Europe could take out a loan. However, the situation has changed and today, the financial market is “fragmented”. What do we actually mean with this? Simply that the criteria for accessing credit varies greatly across Europe. For example, an SME in Spain must satisfy vastly different criteria in than an SME in Germany in order to take out a loan.. The result of this is that banks are failing to grant loans to companies in Spain while similar companies in Germany are being provided with the credit they need. Moreover, even in cases where they can access loans, Spanish companies end up paying a hefty premium, estimated by Deutsche Bank to be in the region of three and four percent. This fact is drowning many small and medium Spanish enterprises and therefore affecting the recovery of the country and Europe as a whole. If SMEs do not have access to credit, their ability to run a business is severely impeded and this in turn has serious consequences on the employment situation and economic growth. We need to consider the different possibilities available to solve this problem. The ECB is expected to cut the interest rate by 0.5% in a few months. However, we have observed how a decrease in interest rates will not solve the fragmentation in the financial markets. We should therefore consider measures such as the ECB changing its collateral policy and authorising banks to use SMEs debt to access credit from the ECB. There is also possibility that the ECB could buy SMEs debt directly from banks in the periphery countries. These measures, as opposed to low interest rates, would have a direct impact on SMEs, as they could access credit and thus bring us back to the path of growth. The two questions that will decide the future are: will Germany accept such measures? Will the ECB assume a role that it has until now refused? I have no doubt that something is moving in the ECB. http://thinkingeurope.eu/blog/smes-solution-europe

Much ado about nothing

News emerged last week which contributed to a climate of confusion, fuelled by conflicting messages fantasising about unlikely scenarios. After a series of reports suggesting that the Commission could carry out a Macroeconomic Imbalance Procedure (MIP) with Spain, some sections of the media interpreted this as a reprimand of the Government of Spain. Last week the President of the Eurogroup, Jeroen Dijsselbloem, re-affirmed his confidence in Spain, stating that Spain can be the engine of growth in the Eurozone. These events give the feeling that some sections of the Spanish media are liable to deliberately magnify the negative when reporting economic news. Despite of the importance that carrying out a MIP could have, one must bear in mind certain facts. Firstly, we must remember that any decision to carry out a MIP will be made on the basis of previous procedures, including an analysis of relevant data in 2011 under the government of President José Luis Rodríguez Zapatero. Subsequently, there is a final check to identify the countries with excessive macroeconomic imbalance. In this case, Spain and Slovenia. This process involves an information gathering process and does not necessarily involve any mandatory corrective action. We must bear in mind that in order for this procedure to have consequences, like the imposition of conditions or sanctions, we would have to move to a new step of the process in which the Council, on the basis of a recommendation from the European Commission, would advise the concerned Member States to take corrective action. Therefore, it is obvious that the controversy does not respond to reality. Moreover, I have no doubt that corrective actions will not be recommended. The Vice President of the Commission, Olli Rehn, has already hinted the fact that the Commission would give Spain two additional years to meet its deficit targets. Data shows that Spain, despite the challenges that still have to be faced and of which its current Government is fully aware, is on the right track. But let us not forget that is also time for Europe to act. Even if Spain is on the right track, every effort will be useless if Europe does not create a banking, economic, fiscal and ultimately political union. http://thinkingeurope.eu/blog/much-ado-about-nothing

The cloud: a business opportunity for EU SMEs

The new dimension created by the development of Information and Communications Technology (ICT) provides a clear business opportunity for small and medium sized enterprises in the European Union, which should be taken as a formula to create jobs and boost business competitiveness. At present, the possibilities offered by newly created tools such as cloud computing enable European SMEs to have an opportunity to grow that needs to be promoted by the EU institutions. Cloud computing is a new technology tool that allows businesses to access a catalogue of services. It also allows businesses to respond to their needs in a flexible manner and enable them to adapt to the demands of the moment, paying only for what they need to consume at any given point. Cloud computing also increases the number of network-based services, enabling providers to operate in a faster and more efficient manner. Finally, these benefits come with an optimisation of costs and a guarantee that the service will remain secure. The European Union must make a firm commitment to further the use of this valuable tool. As my colleague MEP and President of the European Internet Foundation, Pilar del Castillo points out, cloud computing offers a unique opportunity to spur economic growth and boost employment. Studies have concluded that fully implementing this tool could generate an estimated 3.8 million new jobs in the EU in the framework of the Horizon 2020 Programme. Besides promoting job creation and innovation, and contributing to increased productivity and competitiveness, cloud computing has tremendous potential in terms of cost savings of ICT. It will also act to boost the development of the digital single market. Data protection regulations must be adapted in order to accommodate this new technology and, at the same time secure and strengthen consumer confidence. On the other hand, the fragmentation of the Digital Single Market should no longer be one of the outstanding issues, in order for cloud computing to realise its full potential. In order to carry out these actions, we need the support of the EU to continue to promote access to new technological innovations including the deployment of High Speed broadband in Europe or the achievement of other initiatives already underway, such as the Galileo program of the European Commission for the development of the European satellite navigation. http://thinkingeurope.eu/blog/cloud-business-opportunity-eu-smes

Cyprus bailout and the banking union

A recent study conducted by Deutsche Bank concluded: "Based on this approach the authors could identify improvements in competitiveness in the GIPS countries (Greece, Ireland, Portugal and Spain), but not in Italy and France. This suggests that the reduction in Italy's current account deficit has been cyclical. The persistence of the French deficit is consistent with the lack of competitiveness and more robust domestic demand growth. In short, while some European countries such as Spain are improving the competitiveness of their economies, others are making no such progress. Should this trend continue, economic imbalances in Europe could emerge. In order to emerge from the crisis we need to improve productivity. The only alternative would be to lower wages. All European countries should strive towards creating innovative economies that can sustain relatively high wages and good working conditions. Europe cannot compete on the basis of labour costs. Rather, Europe must compete in terms of innovation and talent. The second issue on which we should reflect is the lack of competitiveness of the French and Italian economies, as found by Deutsche Bank. Economic experts are concerned about both economies. France has become less and less competitive because of a failure to introduce necessary structural reforms. In Italy, the forthcoming elections make it unclear whether or not an agenda of structural reforms, of the sort which benefited countries such as Spain, will actually be introduced. Hopefully in the coming months, Italy and France will resume a reform agenda and begin to experience economic growth once again. Not only for the good of their respective citizens, but for the good of all Europeans. http://thinkingeurope.eu/blog/restoring-europes-competitiveness

Restoring Europe's competitiveness

A recent study conducted by Deutsche Bank concluded: "Based on this approach the authors could identify improvements in competitiveness in the GIPS countries (Greece, Ireland, Portugal and Spain), but not in Italy and France. This suggests that the reduction in Italy's current account deficit has been cyclical. The persistence of the French deficit is consistent with the lack of competitiveness and more robust domestic demand growth. In short, while some European countries such as Spain are improving the competitiveness of their economies, others are making no such progress. Should this trend continue, economic imbalances in Europe could emerge. In order to emerge from the crisis we need to improve productivity. The only alternative would be to lower wages. All European countries should strive towards creating innovative economies that can sustain relatively high wages and good working conditions. Europe cannot compete on the basis of labour costs. Rather, Europe must compete in terms of innovation and talent. The second issue on which we should reflect is the lack of competitiveness of the French and Italian economies, as found by Deutsche Bank. Economic experts are concerned about both economies. France has become less and less competitive because of a failure to introduce necessary structural reforms. In Italy, the forthcoming elections make it unclear whether or not an agenda of structural reforms, of the sort which benefited countries such as Spain, will actually be introduced. Hopefully in the coming months, Italy and France will resume a reform agenda and begin to experience economic growth once again. Not only for the good of their respective citizens, but for the good of all Europeans. http://thinkingeurope.eu/blog/restoring-europes-competitiveness