Commission staff working document
: ACCESS TO FINANCE IN THE CRISIS
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- Increasing advances to ERDF ESF and EAFRD programmes
- Simplifying the system for advances
- Temporary framework for state aid rules
5: ACCESS TO FINANCE IN THE CRISISCohesion policy38 and the EU rural development policy recognise the difficulties of SMEs in gaining access to finance, especially in the case of innovative companies in the early stages of growth or expansion. In the 2007-2013 programming period, under the Cohesion policy, at least € 27 billion is targeted directly at SMEs and an additional amount of around € 28 billion is planned for support to productive investment not related to business size, of which a large proportion should also benefit micro, small and medium-sized enterprises. The Rural development policy further invests more than € 9 billion in rural non-agricultural SMEs (including via the Leader approach), and more than € 20 billion are targeted as productive support towards agricultural, forestry and agri-food enterprises, which are predominantly family-based, micro- or small businesses. In additional to the traditional support through grants, Structural Funds and the Rural Development Fund can also provide other forms of financing to SMEs, such as equity investments, loans, guarantees or a combination of these. Financial engineering instruments have acquired a new emphasis in the current programming period, namely through specific provisions made in the regulations to promote the use of these instruments and a stronger association of the international financial institutions (IFIs), in particular the European Investment Bank (EIB) and the European Investment Fund (EIF), in the development and implementation of some products (for example, the Joint European Resources for Micro to Medium Enterprises fund (JEREMIE), which is a joint initiative developed by the Commission together with the EIF/EIB for the 2007 2013 Structural Funds programming period, with the objective of improving access to finance for SMEs and new business creation through financial engineering instruments). The JEREMIE initiative has been showing good progress and has currently been developed in 15 Member States either at national or regional level, or both. Total funds legally committed under 29 JEREMIE holding fund agreements exceed € 3.1 billion. The EIF directly manages 11 mandates for some € 1.1 billion and many Member States and regions are implementing JEREMIE with other financial institutions, national or regional, acting as holding funds (two-thirds of legally committed funds). There are also financial engineering instruments for SMEs implemented without holding funds in other regions. Additional financial engineering support to businesses in rural areas as well as to agricultural and agri-food enterprises are given under the European Agricultural Fund for Rural Development (EAFRD). In total 23 rural development programmes by 8 Member States have foreseen such possibilities (Latvia, Lithuania, Italy, Romania, Germany, Belgium, Corse (France), Greece). The EAFRD funding for financial engineering actions has seen a steady growth in the last two years with total EAFRD funds committed for the period 2007-2013 reaching already € 573 million. Additional public co-funding will bring the overall expenditure for financial engineering under rural development to more than € 650 million. There are also several regional financial engineering initiatives (mostly in Italy) without EAFRD support to have been provided. Microfinance is an important means of stimulating self-employment and the creation of micro enterprises and is increasingly an option for the unemployed to earn a living. In the current context of reduced credit supply, the new European Progress Microfinance Facility, established by the European Commission, aims to ease access to finance for people who want to start up or further develop their own business but have difficulties in accessing banking loans. An initial budget of € 100 million is expected to leverage to a total amount of € 500 million in micro-credit. This will be realised in cooperation with the European Investment Bank (EIB) Group and is expected to result in around 45 000 loans over a period of up to eight years. Financial engineering instruments are used primarily to deliver non-grant financial support for SMEs. There are sectors where investments can be expected to yield a revenue stream and are therefore amenable to repayable support; involvement of financial sector also brings additional co-financing to the system. Typical areas of support include:
Discussions with Member States and other stakeholders show that there is widespread support for the continuation and possible expansion of the use of financial engineering instruments in current and future programming periods. Future discussion will address the possibilities of redirecting a decisive amount of support to the private sector, and particularly towards SME development, and to non-grant forms of assistance. Increasing advances to ERDF ESF and EAFRD programmes Additional advance payments provided an immediate cash injection of € 6.25 billion in 2009, with a view to increasing pre-financing and accelerating investments for the benefit of final beneficiaries, all carried out within the financial envelope agreed for each Member State for the 2007-2013 period. This amendment to Regulation (EC) No 1083/2006 had brought the total of advance payments to € 11.25 billion in 2009. All advance payments were paid to the Member States by June 2009. Similar increase of advance payments has been carried out by the EAFRD, where advance rate payments for investments have been raised from the initial 20 % to 50 % following an amendment to Regulation (EC) No 1698/2005. Additional higher EAFRD co-financing rates for the period of the economic crisis have further eased the burden on national and regional budgets. By doing this, the EU has allowed more money to be spent rapidly on priority projects and Member States have acknowledged the facilitating role of additional advances in the context of their liquidity difficulties. Almost all Member States, with the exception of Austria, Denmark and Sweden, indicate how the advances were applied, often involving changes in national policy and procedures. However, the use of advances varied between countries. Accelerated spending through the EU budget provided support to Member States and regions that were feeling the strain of severely constrained public finances (in Latvia, for example) and enabled more rapid implementation of structural funds programmes. Most countries used these additional resources for projects to support the public sector (ie local authorities) and non-governmental organisations (NGOs). Advances were also used to support SMEs, both through guarantees and under state aid schemes. Further, some Member States (such as Poland and Estonia) adapted their schemes to increase the pace and volume of advances to both public and private beneficiaries or to reach out to specific groups at risk. In other cases, advances were used to address specific objectives such as promoting competitive funding schemes for urban regeneration projects in qualifying towns (eg Gateways and Hubs in the UK). It is clear that this measure has been received favourably by Member States, particularly in terms of its contribution towards the achievement of financial targets for 2009. Some Member States have emphasised the positive impacts associated with the easing of liquidity and supporting investment. Simplifying the system for advances In order to support enterprises, and particularly SMEs, the conditions governing the payment of advances within the framework of EU state aid rules were made more flexible by allowing state aid advances to reach 100 % of total aid (until the end of 2010), instead of 35 %, provided the other conditions laid down in Article 78(2) of the General Regulation are met. A total of 10 Member States (Cyprus, Germany, Estonia, Greece, Italy, Latvia, Poland, Portugal, Romania and Slovenia) indicated that they had used this simplification. Some Member States (eg Greece) had decided to increase the threshold from the 35 % to 50 %, rather than the full 100 %. In addition, the Commission put into place a temporary framework under the state aid rules for Member States to tackle the effects of the credit squeeze on the real economy until 2010 (see below). Temporary framework for state aid rules In addition to the above-mentioned legislative changes, on 17 December 2008 under EC Treaty State aid rules, the Commission adopted a temporary framework providing Member States with additional means to tackle the effects of the credit crunch on the real economy. The detailed provisions of the temporary framework are discussed in more detail in Chapter 3, section 1.1.2. 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