smes-financeHas “Super” Mario Draghi saved the euro? Last week, the European Central Bank chief announced a trillion-euro scheme to buy up government debt, a policy that has already led to a softening of the value of the Single Currency, hopefully boosting European exports and staving off the threat of deflation.

However, will the ECB’s plan really help normal Europeans? Will all the extra money created to buy bonds and other assets stay locked up in the banking system, or will it work its way out into the wider economy? We had a comment from Marcel, who argued that poor and middle class families won’t feel any of the benefits of Quantitative Easing:

These programmes benefit the rich (buying/guaranteeing their assets) and end up hurting the poor and middle class (via higher inflation).

How can we ensure that banks don’t just sit on that money, and instead loan it out and invest in the wider economy? For example, we had a comment sent in from Guido arguing that access to start-up credit is one of the biggest challenges facing small businesses in Europe. He argued that finding the financing to start a small business in the EU is much too hard, and more often than not it means investing all your personal wealth, or even taking out personal loans – usually against your house. If the business goes belly-up, then you lose the roof over your head, which obviously cools the entrepreneurial flame.

We recently spoke to Marjut Santoni, Deputy Chief Executive at the European Investment Fund (EIF). The EIF is a European Union agency that provides risk finance to benefit small and medium-sized enterprises across Europe. It offers targeted financial products to banks and other intermediaries, guaranteeing and leasing companies, micro-credit providers and private equity funds. In other words, the EIF is exactly the EU agency designed to encourage banks to lend to small businesses. How, then, would Marjut Santoni respond to Guido’s criticism?

santoniI would agree with him. And I would say that this is exactly what the European Commission has recognised, and that is why they have set up financial instruments that try to help banks to take more risks in order to provide credit to start-up companies. And these are exactly programmes like the COSME [Competitiveness of Enterprises and Small and Medium-sized Enterprises] programme, or the programmes under Horizon 2020 [the EU’s Framework Programme for Research and Innovation], which are aimed at facilitating access to financing by entrepreneurs and SMEs.

Furthermore, EU structural funds can be used by Member States to establish financial instruments, under which banks and other credit institutions can provide credit to start-up companies. So, I absolutely agree with him, and I’m glad that the European Commission has taken steps to try and improve the situation.

We also had a comment from Mihai, who thinks the best way to support small businesses – especially new businesses – would be providing access to investment loans for more than 10 years. These would offer a smaller repayment rate monthly which would make credit more attractive. How would Santoni respond?

santoniI would also answer positively, and say that I’m exactly of the same view. And, again, the programmes that we’re managing on behalf of the European Commission tend to promote longer maturities. So, as banks tend to provide more mid-term credit, European entrepreneurs are eligible under the programmes like COSME and the Horizon 2020 programmes for more long-term credit.

How can we encourage European banks to lend to small businesses? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions!

IMAGE CREDITS: CC / Flickr – Spyros Papaspyropoulos

34 comments Post a commentcomment

What do YOU think?

    • avatar
      Ruth C

      That is exactly what Banks do – create money from air. It never exists.

  1. avatar
    Andrew Lally

    give 500 euro to everybody directly instead of via the bankers who we know will skim the cream off the top

  2. avatar
    Ivan Burrows


    Money for the banks, continued austerity for the people.

    It’s the European way.

  3. avatar
    Blake Richard Bull

    The fact of the matter is, most banks in the EU are privately owned (which I’m a fan of). However, if you give banks low interest credit on the understanding that they may loan to businesses you’re deluded. They’re just going to slowly wash away all their bad debt whilst lending short term low risk loans to mid-large businesses (at 1-2% more than they were given the money). Whilst at the same time normal people with a simple 1-5k overdraft get incrediably high interest rates (%15+). The EU needs to address this issue. Every bank should have a quota of small businesses it lends to otherwise the counter effects of businesses using their own cashflow to expand will impact the economy in a much different way.

  4. avatar
    James McManama

    Well, a deflationary spiral would have destroyed small businesses and bankrupted many of them. Consumers would have saved their money (logically assuming that the value of products would continue decreasing, so waiting to get a better bargain). So, in that sense, if QE does what it’s supposed to then it will benefit everybody in the Eurozone.

  5. avatar
    catherine benning

    Threaten to remove all the bailout money they hived off the tax payer if they don’t. Simple as that. For if you did that, they would go as bankrupt as they have made the rest of the ordinary people on this continent.

  6. avatar
    George Yiannitsiotis

    How can we get European banks to lend to small businesses?

    Nice joke! European banks are used (since May 2010) to be rescued (via Greece, Portugal, Ireland, Spain and other PIGS) consuming public money, thus raising public debt. Do you foresee a major change in Euro-politics regarding the euro that can lead the rescued european “bankers” keen to lending money to smashed by depression in the periphery, entrepreneurs??

  7. avatar

    How can we get European banks to lend to small businesses?

    Banks will eventually lend you some dough, but at unbearable interest rate and/or a huge collateral, and for the “lucky” few qualifiers in “toxic” currency (CHF ex.). So, if your small business smells like Zero Risk/Huge Return for banks, go ahead.

  8. avatar

    The question is a joke!
    Banks look after banks and those who run them, Banksters.
    The hard working duped and lied to european wont see a dime, not one red cent.
    The ecb is run by cartels, big american corporate banking cartels who see the average eu citizen as nothing more than a rug to walk on.
    They say people like the euro and the eu, but they shudder at the thought of referendums. Go ahead ask us ,i dare ya…
    They know the EU project is an unwanted and hated elite bankster project.
    The banks in europe have lost billions in oil derivatives, the banksters are recouping thier loses..
    People need to wake up, the bankster cartel isnt interested in the eu.
    Its a corporate farce a scam . The ecb is a private bank, along with the american federal reserve, and all federal banks and are run by BIS, thus americans.
    The good ole usa runs the show in the eu, so dont expect anything except a downward spiral.
    The yanks need cash, your cash!!!

  9. avatar
    Jaume Roqueta

    stop giving the money from ECB to them and give it to the governments and central banks.. then banks would have to return to its old bussines… saving and giving money to the people, not as an intermediates between central banks and countries!…

  10. avatar
    Jaume Roqueta

    1 bilion per year means = 3000 euros per person that ECB is introducing to the market… with that amount of money the banks can easyly contract all the population of the eurozone… so we will be their workers.. this is the main porpouse of all this sistem in my opinion…

  11. avatar

    The ECB QE (illegal as it is) will exclusively benefit the rich bankers. I would be very surprised if more than 1% ‘trickled down’ to others.

    Why do so many people fail to recognize that economic growth depends on population growth, and not on debt expansion or ‘more free trade’?

    Italy for example, in order to have structural 2-3% economic growth, it would need approximately 2-3% annual population growth, meaning 2 million new Italians per year. Japan hasn’t seen real economic growth at all this century, and also it doesn’t really have population growth anymore. The correlation is strong and clear.

    • avatar
      EU reform- proactive

      Hi Marcel, ……….. not quite!

      You simply continue and always link economic growth to population growth (%) or maybe crude birth rates (per/1000?)- only.

      Many factors however contribute to an economic & sustainable growth cycle. Otherwise the poorest countries & its people with the highest pop-growth in Africa or Asia would fit that bill. Greece with 26.4% or the whole EU with ~11.5% unemployed would still have a ‘growing population’ potential’ of ~20.4% or 5.5% employable workers as a labor reservoir for the EU, before ‘depleting’ its employable population- accepting a ~6% unemployment rate as normal.

      Surely, many more factors play a role: stable political, investor attractive climates. Astute decisions making in each country, minimum corruption, levels & needs of infrastructure development, entrepreneurial spirit, local & global demands, premium education producing sought after skills, spending & buying power of the populace, level of sophistication, saturation or shortages in the various regions …etc, etc!

    • avatar

      @EU Reform

      Suppose you have a big calamity that kills 50% of the world population, equally dispersed across the entire planet. What do you think is gonna happen to GDP? It’ll decline, of course, by on or around 50% in every country or something close to it. No amount of reforms is going to prevent that. In fact, in the beginning it’s going to be even worse until it stabilizes at the level of approximately 50% lower than it was before.

      Population growth is, and always has been the leading factor of determining economic growth. Not saying there aren’t any others, but population growth is the leading factor.

      And for Greece, the Euro is a calamity of previously never seen before proportions. A calamity that would have been seriously reduced if it hadn’t been for the killer element in the cocktail, the Euro itself.

    • avatar
      EU reform- proactive


      Should the EC/EU (or any economists) either plan for a (Utopian) 50% EU wipe out (~250mio people), a rise or dilution in EU living standards, or a more realistic EU economic stagnation & failed EU policies- that EC/EP politicians are unable to resolve?

  12. avatar
    Ferenc Lázár

    They should make laws in the E.U. that all small businesses can borrow directly from the E.U. bank budget! Otherwise all member states politicians setting up their own businesses through their wives, children and relatives, therefore is no real competition! That is why the european small companies are not competitive, many of them are set up just for atracting founds from E.U. !

    • avatar
      Tarquin Farquhar

      @Ferenc Lázár
      On the face of it not a bad idea BUT if you scratch below the surface its interesting to note that the EU’s accounts have not been signed-off for nigh-on 2 decades. Ergo, the EU [and its German ECB] is not a bastion of financial probity.

  13. avatar
    Nikolaos Sotirelis

    Yesterday afternoon a tragic accident with 11 dead happened in a NATO base in Spain. The accident was caused from the fall of a Greek F16.
    I’m afraid this might was an austerity incident!

  14. avatar

    Why would you want to borrow money? You only get to be a slave to these criminal bankers. Not borrowing money is the smart move. Stop feeding the debt-machine.

  15. avatar
    Hakan Ürem

    The European Central Bank (ECB) finally pulled the QE trigger by committing to purchase 60 billion euros of government debt and other assets every month until September of 2016 or until inflation gets closer to 2 percent.

    The made-up excuse for this legal counterfeiting is that Europe is dangerously close to having (a very flawed) index of consumer prices drop below zero; as though calamity would strike Europe if the index were to register a negative number. The ECB claims it needs to print money because lower oil prices and ? previous to that ? a stronger euro were causing average prices to deviate from its 2 percent inflation target. It?s like having your supermarket run a 50 percent off sale on steak one weekend, and then having the ECB try to make all other prices in the supermarket go up so your total bill at the cash register goes up.

    The 2 percent inflation was never meant to be a target, but a ceiling. The problem has never been too little printing but too much printing. Deflation has never been a real problem (see here, here and here), but bouts of inflation have regularly led to chaos and social upheaval.

  16. avatar

    European union should take care of their citizens irrespective of their nationality and start focusing it as one country. Every self employed eu citizen and his or her family should be supported for few years.

  17. avatar
    George Yiannitsiotis

    Simple question, complicated answer. Without tackling the key problem (usurers) and regulating the “banks” in order to forcing them into real banking operation (instead of usurers’ one they practice up to now), there is no way the “EU banking system” and arc-usurer ECB to behave as normal creditors.

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