SMEs vital to economic success, say EU leaders amid warnings over austerity

With more than 23m people unemployed in Europe and austerity measures threatening the possibility of creating jobs, EU leaders agreed a series of measures designed to stimulate growth.

Taoiseach Enda Kenny spoke about the importance of the SME sector and told of the Government’s approach to aiding the country’s 100,000 small and medium-size companies.

He was one of five asked to speak to his fellow EU leaders during the summit about the importance of different aspects of the economy to drive job creation.

Economists have warned that a focus on cutting back spending to meet deficit targets was a recipe for a long-drawn out recession.

Sony Kapoor, a member of the Re-Define economic think-tank, warned that concentrating on the fiscal treaty alone without agreeing a complementary growth compact could backfire badly.

“Without a growth compact, a fiscal compact does nothing to tackle the euro crisis. Austerity is not an end in itself,” he said.

Mr Kenny emphasised the need to ensure that SMEs have access to finance and to cut the amount of red tape they have to deal with — a plea contained in a document signed before the meeting by six countries, including Ireland.

Access to finance will be a central part of the Government’s action plan for jobs, which is to be published in the coming weeks. It will include measures to help young people in particular to enter the workplace.

Mr Kenny said money would be released through a micro-finance loan fund and a temporary partial credit guarantee scheme. He also spoke of monitoring banks to ensure they lent to the real economy.

“We are building economic recovery, brick by brick. It is vital we get the foundations right. Putting SMEs right at the centre of our thinking is an absolutely critical part of this work.”

The EU leaders agreed that SMEs were the backbone of Europe’s economic success and that funding was a major issue. They pledged to investigate ways of freeing up more money for them through the European Investment Bank, which has been making funds available through pillar banks.

The leaders also agreed to examine the European Commission’s idea for project bonds — using public funds to leverage private financing for infrastructure projects.

There was emphasis on the fact that almost 25% of Europe’s young people are unemployed and a large part of the answer put forward at the summit was ensuring that everyone was either in a job, further education, an apprenticeship or a traineeship within four months of leaving school.

Commission president José Manuel Barroso told the meeting that governments could not afford to provide a fiscal stimulus to create jobs — but they must ensure the way they were cutting their spending must be smart. “Countries which cut in the very areas they need to nurture for future growth will pay a heavy price down the line. This is not a choice between fiscal consolidation and growth. We need both,” he said.

One cost-neutral way could be to complete the single market, where the abolition of barriers to cross-border trade inside the EU has previously led to economic growth.

The leaders also called for progress in talks on co-ordinating tax policy. Most countries, including Ireland, have agreed to discuss this under the Euro Plus Pact. Compared to the emphasis France wanted to put on harmonising tax, this was the most minimal reference that could be expected to an issue Ireland is very sensitive about.