Investment Plan for Europe : new SMEs initiative in SpainJanuary 28, 2015
Hat: Investment Plan for Europe : new SMEs initiative in Spain
Funding Scheme: 2015-01-26
Pgm2014 2020: Yes
The Investment Plan for Europe offers more than 3.2 billion euro of cheaper credit for spanish companies.
The European Commission welcomed today the signing of the SME Initiative with Spain, a ground-breaking agreement to unlock more than €3.2 billion of additional lending for companies with fewer than 250 employees (SMEs).
In practice, under the new SME Initiative signed with Spain, regions in the country will reallocate part of their EU funding from European Structural and Investment Funds, i.e. €800 million. Rather than being given as a traditional grant, this pooled money will be channelled through the SME Initiative and used as a guarantee to take first risk in projects. This results in a higher leverage than if the funds were given as traditional grants and will make possible at least an additional €3.2 billion and – depending on market take-up – up to €5.3 billion for Spanish SMEs.
SMEs must be supported. They are the backbone of the European economy. SMEs represent over 66% of private sector employment. In Spain, this figure goes as high as 74% and SMEs account for 85% of newly created jobs. SMEs are a stable source of employment, with strong links to their local communities.
The Investment Plan for Europe calls on Member States to make better use of the EU budget by shifting away from traditional grants to using loans and guarantees. In particular, it calls on Member States to double the use of innovative financial instruments within their allocation of European Structural Funds. Spain is the first EU country to put this into practice, using the SME initiative.
The SME Initiative also complements the new European Fund for Strategic Investments (EFSI) and comes on top of EU programmes such as the Connecting Europe Facility, Horizon 2020, for which Carlos Moedas, Commissioner for Research, Science and Innovation is responsible and the ‘COSME’ programme, for which Elżbieta Bieńkowska, Commissioner for Internal Market, Industry, Entrepreneurship is responsible. The latter will attend, amongst others, the signing ceremony at 17:30 CET in Madrid.
The EC-SME instrument in Spain
The SME Initiative in Spain provides guarantees to financial intermediaries (banks and other financial institutions). The guarantees cover portfolios of loans extended to eligible SMEs.
This means that in case of defaults of loans given to SMEs, the SME Initiative partly covers the defaults. However, for each and every loan that they extend, the banks and other financial intermediaries, will retain part of the risk. The default risks are first covered by the Spanish contribution from their European Structural and Investment Funds, then by the EU budget, then by the EIB Group.
Thanks to the guarantee from the SME Initiative, banks and other financial institutions can provide more and cheaper loans to SMEs. This is because their credit-risk is partly covered and thus reduced.
In that set-up, where all partners share the risk, the leverage is strong. Each 1 euro of Spanish European Structural and Investment Funds will result in at least 4 euros of loans given to Spanish SMEs. This is a more efficient way of using public money for the benefit of SMEs, investment, growth and job creation.
The SME Initiative financing comes on top of Spanish national and regional financing to SMEs, in the form of grants or financial instruments, including through European Structural and Investment Funds’ resources. It complements also other EU financing, including the new European Fund for Strategic Investments (EFSI) at the heart of the Investment Plan for Europe which will mobilise more than €315 billion of public and private investment funding over the next 3 years. EFSI applies the same logic of moving from traditional loans to innovative financial instruments such as guarantees to get maximum value from the EU budget.
What happens next?
Following the signature today, it is for the European Investment Fund (EIF) to implement the SME
Initiative in Spain. The EIF will shortly publish an open call inviting banks and other financial intermediaries to apply. Once selected, these banks and other financial intermediaries will make SMEs in Spain aware of the new funding opportunities. The first loans to SMEs should be available in the summer.
Url description: Presse de la Commission européenne