EU: Strategic guideline should replace small-scale funding policy after Corona pandemic crisis

20.05.2020

According to the IfM Bonn, the corona pandemic crisis offers the European Union (EU) the opportunity to end the previous small-scale and short-term economic policy for small and medium-sized enterprises (SMEs) and to initiate a regulatory policy-oriented, cooperation-promoting European SME policy.

Due to the sometimes very different economic policy models and economic power in the member states, EU SME policy has so far mostly been limited to the lowest common denominator. "The current corona pandemic crisis now poses the same challenges to all member states. This offers the opportunity to set up a new forward-looking European SME policy. Only with a strong economy and innovative entrepreneurial spirit in the member states can national governments overcome the social consequences of the pandemic. Accordingly, national governments could now be more willing to think about a future-oriented SME policy," explained Prof. Dr. Friederike Welter (IfM Bonn/University of Siegen). Not least the national border closures as an immediate reaction to the Corona pandemic had shown how much Europe's society and economy are now networked: "For almost all member states, the European internal market is by far the most important sales and procurement market and the main target region for direct investments. For example, intra-EU trade accounts for over 66% of Spain's export volume. France and Germany follow with almost 59 % each", says the IfM President.

Prof. Dr. Friederike Welter recommends that the internal market should now be revitalised efficiently and existing obstacles removed so that it can develop its full potential. After all, European SMEs should be able to benefit not only from the size of the internal market but also from largely harmonised rules. This will reduce transaction costs and increase productivity gains.

However, the European Single Market is ideally much more than the sum of the domestic markets of the member states. The European SME policy should therefore relate the manifold entrepreneurial potentials in the member states to each other through a policy of qualitative competence, innovation and cooperation expansion. Instead of small-scale economic policy measures, a strategic framework should be worked out into which the individual measures of European SME policy can then be integrated in. The German EU Council Presidency can present the advantages of a social market economy based on consensus and cooperation within a European discussion process on a regulatory basis. The aim is to ensure that citizens in the EU member states perceive the internal market equally as an advantageous, "fair" instrument. In doing so, the different realities of life in the EU member states must also be taken into account.

"The European SME sector is - regardless of the Corona pandemic crisis - in a major transformation process that is challenging all member states in a similar way. The increasing digitalisation and the sustainability of the economy (Green Deal) are only two keywords. At the same time, it is important to maintain social balance, social cohesion and a free basic order for the economy and society," explained Prof. Dr. Friederike Welter. Embedded in a strategically oriented European SME policy, the internal market can offer efficiency advantages and (planning) security in a world marked by a wide range of uncertainties, and thus possibly develop even greater attractiveness for economic actors from other regions of the world.

IfM-Background Paper