COVID-19 has been a tsunami for SMEs. The EU's proposed new SME strategy, which predates the crisis, fails to cope with the huge challenges that have since jumped to the fore, says the European Economic and Social Committee (EESC) in a recently adopted opinion.
COVID-19 has dealt a very serious blow to SMEs across Europe, many of which risk being swept out of business in its wake.
How can the new EU strategy for SMEs, which was put forward before the pandemic and has not been overhauled since, help the sector cope with the aftermath, asks the EESC in an opinion on the European Commission's draft strategy adopted at its September plenary.
"What we really need at this point in time is a sort of 'Next Generation EU strategy' for SMEs, putting together all there is for SMEs under the huge umbrella of loans and grants from the Recovery plan for Europe to mitigate the negative effects of the lockdown, social distancing and health security measures and help businesses recover quickly", says opinion rapporteur Milena Angelova.
SME organisations to cover the last mile
SME organisations ought to have a pivotal role in the successful implementation of the strategy, as they can ensure that the needs of all different groups of SMEs are met and can shape any follow-up measures that may be needed.
Instead, the strategy mainly relies on existing national SME envoys, a new EU SME envoy and the Enterprise Europe Network.
But the EESC points out that the network of national SME envoys, which represent Member States’ authorities in charge of SME policy, is not fully operational in all Member States. It also stresses that, as SME envoys come from the administration, they need to stay in constant contact with SME organisations and listen attentively to their advice, if they are to play a useful role.
The new EU SME envoy, which is meant to ensure a link between the EU and national authorities, cannot provide any guarantee of SME-friendly regulations.
The Enterprise Europe Network, whose mission is to help businesses go international, does not, in its present form, reach SMEs, still less craft enterprises.
"Neither European, nor national or local authorities can do this on their own", says Ms Angelova. "Only representative organisations can help cover the last mile and reach SMEs to deliver what are probably the most ambitious actions that the UE has ever managed to deploy."
The pressing issue of liquidity
"SMEs will be facing huge liquidity challenges in the months to come", says co-rapporteur Panagiotis Gkofas. "Many of them will be waiting for a strong signal of support to bring them back from the brink of collapse."
The EESC calls for a rapid EU liquidity response, preventing national credit systems and financial intermediaries from imposing unjustified delays and arbitrary decisions on micro and small businesses in urgent need of liquidity.
Over and above the emergency situation linked to COVID-19, the EESC sees a strong need to create a network of financial ombudsmen to help SMEs better understand the banking system's requirements and promote alternative sources of financing like equity and capital markets.
The European Commission published its SME Strategy for a sustainable and digital Europe on 10 March, just as Europe went into lockdown.
The strategy aims to help SMEs face the twin transitions towards climate neutrality and digital leadership.
The Commission does not intend to revise the strategy in the wake of the COVID-19 crisis, but only to re-orient it, focusing on the measures that are most relevant in the current context, such as facilitating access to finance and implementing the late payment directive.
The EESC supports the financial measures implemented by governments and social partners during the pandemic, as they have succeeded in reducing financial hardship for SMEs, and urges that such support should continue.
The 25 million SMEs in the EU are the backbone and engine of the Europe's economy. They employ around 100 million people and account for more than half of its GDP. Over the last five years, SMEs have created 85% of new jobs and account for two thirds of total private sector employment in the EU.