The EU Needs to Give the Small Business Act Some Real Teeth

In order to keep the EU economy competitive, the European Commission is drafting a so-called “Small Business Act” – a set of policies that is supposed to help small and medium-sized enterprises (SMEs) in the EU grow. 

On Thursday, European Industry Commissioner Guenter Verheugen welcomed the “broad support” that his initiative received at an informal meeting of EU ministers in charge of competitiveness on April 16.

At the meeting, Verheugen and Slovenian Economy Minister Andrej Vizjak reiterated once again that SMEs constitute the “backbone” of the European Union’s economy, accounting for roughly 70% of EU jobs and GDP.

Since the EU is likely to lose jobs in big industry over the next few years due to competition from low-wage countries like China and heavy industries moving outside Europe to avoid strict environmental standards, SMEs’ importance is bound to increase even more in the future, Verheugen and Vizjak said.

“The only way to compensate for [the loss of big industry jobs in Europe] is to create good and secure jobs and more small and medium-sized enterprises,” Verheugen stated.

The Small Business Act is among the European Commission’s tools for achieving these goals.  Ministers agreed that the aim of the initiative must be to help small innovative enterprises in Europe to grow by addressing barriers such as the lack of access to finance and high risks and difficulties in retaining exclusive rights to use innovations.

“I can guarantee it will be a substantive package with a lot of legislative proposals, a lot of political actions to be undertaken at EU and member state levels,” Verheugen announced after Thursday’s meeting.

The European Commission is certainly right about the importance of innovative SMEs to the EU economy.  It is also right to draft an initiative that addresses such problems as the lack of finance for small companies and the difficulties SMEs face in protecting their innovations. 

The only challenge that remains for the Commission now is to make sure that the Small Business Act will not just be a paper tiger.  In order to really help Europe’s small and medium-sized businesses, the Commission needs to give the initiative some real teeth by including in it binding measures that open up more markets for SMEs.