GRTU calls on the Belgian Presidency to focus on getting SMEs out of the recession and move in the right direction on the implementation of the Internal Market Reform

During the Dialogue session held today at Dar l-Ewropa, H.E. M. Jean-François Delahaut, Ambassador of Belgium to Malta, presented the programme of priorities of the Belgian Presidency of the Council and of the EU.

Vince Farrugia, Director General of the GRTU Malta Chamber of SMEs and member of the UEAPME and EuroCommerce Administrative Councils, raised two points in relation to the first Priority Area mentioned by the Belgian Presidency: The Economic crises and the Internal Market Reform:

The financial crises that hit the world economy in 2008 and the subsequent economic crises that followed was blamed by the EU on American hedge funds and on other financial locusts. The impression given then was that the villains were elsewhere. The truth however is that many major, and not so major banks in Europe dabbled also in toxic funds preferring the easier earnings made through the financial market then the harder ones, earned through the financing of SMEs.

SMEs were the major victims as credit facilities available by the banks were diverted from SMEs, who badly needed greater access to finance to grow and innovate and be one more competition. In the UK and in America, financial regulators forced an assessment of the Banks` “stress risk” so that villains in the banking system were identified. This did not happen in the EU. The impression was therefore given that there were no risk factor and that SMEs and household investors could continue to hold their hard won financial assets in European banks. In practice, this resulted in a situation where many European banks were not transparent, expecting investors to trust, irrespective of the loss they were suffering in the value of their assets, as many banks continued to hide whatever amount of toxic funds they still held.

SMEs were further hit by the fact that all the assistance and stimulus package paid from European tax payers money, rather than going to the real victims of the financial crises, SMEs and the households, went instead to banks and larger enterprises. With lesser asset value SMEs suffered an additional credit crunch which further inhibited their urge to innovate and restructure out of the recession. This implies that in addition to the economic recession and the fall in demand SMEs also suffered an additional “balance-sheet recession” as their financial assets diminished in value while their liabilities continued to grow. SMEs now seek redress, its not subsidies that they seek but immediate action to help them resolve the problems they have been thrown in as the negative effects on the European economies will continue to be felt for a much longer period in all the EU economies unless SMEs problems are resolved.

According to the Directorate General Enterprise and Industry of the European Commission in its Report published a couple of weeks ago titled “European SMEs Under Pressure”, a staggering 99% of all state aid in the EU goes to the largest firms while only 1% go to SMEs who form 99% of all EU enterprises. The situation now is that in the absence of direct assistance to SMEs, far beyond anything that is being given under current schemes, the danger will remain that of what the Report calls a “W-shaped double dip recession”. This may occur as Government in the Member States are being forced by the EU to cut Government expenditure and/or raise taxes to avoid an aggravation of Governments` financial deterioration in the face of the prolonged economic downturn. SMEs will therefore suffer again from the loss in private and public consumption caused by the curtailing of Government expenditure. Vince Farrugia requested the Belgian Ambassador to press the Belgian Presidency to take more drastic action than that affected by the Spanish Presidency. Mr Farrugia expressed the view that the fact that the new EU President is also Belgian, it should make life easier for Belgian Presidency of the Council. 2. The second point raised by Vince Farrugia referred to the commitment by Council to restructure the Internal Market and remove the hindrances that are stalling greater movement and competition in the Internal Market. Vince Farrugia criticized the Monti Report on the reform of the Internal Market as a report “leaving from somewhere and leading to no where” as it does not really contain any practical suggestions for the Belgian, and follow up Hungarian Presidency, to activate.

Mr Farruigia expressed that the Reform of the Internal Market is extremely important for SMEs in all member states and is essential for small economies like Malta with a very small market of their own. Vince Farrugia praised the Grech Report produced by Maltese MEP Louis Grech saying that it is a report that represent the many views resulting from consultation with representatives of businesses like Eurocommerce, the leading EU Level organization representing the commercial sector, and the Grech report included really practical solutions for the Reform of Internal Market.

Vince Farrugia stressed that SME, leaders and smaller economies expect much more from the Belgian Presidency than what the Monti report is proposing.

In conclusion he appealed to the Belgian and Hungarian representatives to cause their presidencies to give this matter a higher priority listing.

Permalink: GRTU on the Economic crises & the Internal Market Reform