Category: Archive – 2011

Despite all indicators slowly going back to the pre-crisis levels, crafts and SMEs in Europe remain hesitant about the future. Access to finance tops the list of their concerns. UEAPME member associations believe that tailored financial instruments must be secured, improved and created from scratch if need be to answer to the needs of the SMEs they represent, from traditional "mom and pop" small businesses to highly innovative "gazelles", and everything in between.

 

According to the latest "Craft and SME Barometer" released by UEAPME in March this year (see part 2), the proportion of entrepreneurs expecting a positive or stable economic environment is back over the 70-points line that represents a neutral business climate. Business confidence on average is back around pre-crisis levels, although a "two-speed Europe" seems to be emerging.

Overall, the general situation for the Europe's SMEs improved markedly in the second half of 2010, with the number of respondents viewing the situation positively outweighing pessimists for the very first time since the first half of 2008, when the first Craft and SME Barometer was issued. The indicators on employment expectations seem to be encouraging, with medium sized companies, the hardest hit at the start of the crisis, closing the gap and going back around pre-crisis levels.

On the other hand, despite these somewhat heartening results, expectations for the months and years ahead do not seem so upbeat, especially as far as turnover and investments are concerned. The expectation of a lower turnover could be explained by the fact that margins are likely to decrease as input prices, for instance for raw materials, will go up and small entrepreneurs will not be able to pass the extra costs on to their customers. The reigning uncertainty as regards the financial system could be another factor.

 

In such a scenario, ensuring SMEs' access to finance is more important than ever. As we have seen in part 2, throughout the current crisis traditional SME lending has been quite stable and a credit crunch has been avoided by an increase of support measures at European and national level. However, European financial markets in many areas are currently not able to provide SMEs with sufficient forms of finance for varying reasons, and this will also be the case in the future.

Moreover, new and stricter capital requirements for the banking sector in combination with other upcoming financial market regulations may further tighten lending conditions for SMEs in Europe.

Furthermore, one must be aware that crafts and SMEs vary as regards their size, the sectors in which they are active and their business models, ranging from micro-enterprises and family businesses that are working successfully in traditional sectors to a growing number of new startups and fast-growing high-tech and highly innovative enterprises. All these different business models have different problems and, therefore, different needs as regards access to finance, which must be respected by future programmes aiming to support access to finance for SMEs.

During a general meeting organised for GRTU members on Thursday 28th April with the participation of representatives from the Ministry for Infrastructure, Transport & Communications and Transport Malta (TM) regarding projects being carried out in Valletta, it was agreed that the GRTU will continue to mediate in talks between its members and the Ministry over measures to reduce inconveniences caused by the said projects.                                                                                                                                                                                                                                                                                                                                                                                                     

 

An issue that was highlighted during the meeting was the distribution times for goods into Valletta and it transpired that there is a need to change the delivery times and days while works on the Valletta projects are being carried out. GRTU, at present is commissioning a survey among its members, and intends to discuss the results with the Ministry for Infrastructure, Transport & Communications and other Authorities concerned.

GRTU is active at local level and has its committees within the localities composed of members of the locality itself, but in certain areas it also has committees at street level. GRTU will be meeting the authorities in the coming weeks and will issue the results of the survey carried out with the business community on which it will base its discussions to alter distribution days and times.

While most of the people that commented were in agreement with the GRTU President Paul Abela that when people are in business, disruption of family life is fundamental and brings dire consequences on the business itself. There were other voices that complained that since GRTU stated correctly that this is not an issue in which GRTU as a body would express an opinion it would have been better if no person in a position of influence at GRTU was to express any opinion.

 

Among the most vociferous voices on the issue was that of Grace Borg, a long standing member of GRTU and former member of GRTU Council and when contacted she stated:

"I will be voting yes because I believe it is my right to have the choice and the church had no right whatsoever to campaign against divorce. The church has the annulment, which is worse for the children as it would have been as if their parent's marriage never took place."

The meeting with Moviment Zwieg bla Divorzju took place as a result of their invitation and no invitation from the other side during the course of the campaign ever reached GRTU. GRTU would have been pleased to meet this interest group as well.

Government committed to ensure viability of operations – Green MT, Malta's National Waste Packaging Compliance Scheme is today firmly established as the leader in Waste Packaging Compliance on behalf of the Business Community in Malta and Gozo.

 

Green MT members have now exceeded 450 and Green MT continues to be the leader in providing services to 41 Local Council, a commitment to the Community and also provides over 75% of all material fractions recovered to WasteServ's Materials Recovery Facility at Sant Antnin. Since July 01, 2009, Green MT has recovered nearly 21, 000 tons of  Packaging Waste until 31st March 2011.

Green MT continues to stress the importance of producers of Packaging Waste, importers and traders to comply with this very important Environmental legislation. All traders and importers are obliged to register with the Competent Authority MEPA, their market placement for basis year 2009 and then also join an Authorised Scheme prior to 31st May 2011. At present those joining a Scheme and registering with MEPA until that date face an administrative penalty of Euro 100 per tonne for packaging placed on the market in basis year 2009. Beyond 31st May 2011, MEPA will take legal action which will result in heavier penalties. There are also higher administrative penalties envisaged for those who decide that they do not want to comply by 31st May 2011.

Without fail, the business community under the umbrella of Green MT can meet these environmental obligations with the best available technologies at the lowest of cost. Further more the individual trader cannot do this on his own. Self Compliance is expensive and difficult and self compliance will be audited by MEPA too.

Green MT is tangible evidence of Public Private Partnership in relation to Extended Producers Responsibility in relation to Malta's Waste Management responsibilities. The Business Community under the umbrella of GRTU's subsidiary, Green MT, stands up to be counted with facts and not just words. This stride forward signifies the commitments owners of enterprises in the community have done to be totally committed to solving  Malta's Packaging Waste Compliance, involving Local Councils and Government in the process.

Green MT gives credit to those who believed in our commitment towards sustainable operations in such a nation wide project. Green MT publicly thanks the Prime Minister for involving himself directly to make sure Schemes continue to operate on a sustainable financial footing. Our thanks goes also to Mr Alfred Camilleri the Permanent Secretary at the Ministry of Finance, the Economy and Investment, Mr Peter Portelli the Permanent Secretary at the Office of the Prime Minister and also Dr Christopher Ciantar the Permanent Secretary at the Ministry of Resources and Rural Affairs, for making great efforts to make sure that this public private partnership succeeds and continues to operate in a sustainable manner.

The Malta Chamber of Small and Medium Enterprises is also grateful to the policy guideline provided by Ministers Tonio Fenech and George Pullicino and Parliamentary Secretary Mario Demarco  to their respective Permanent Secretaries.

Green MT thanks also both the Competent Authority, MEPA for taking the measures required in order to create both a fair and level playing field for all traders and importers, who are all producers of packaging waste, and also for today providing a solid basis for Malta to reach its National targets in respect to recovery and recycling. We thank MEPAs Environment Directorate for taking the necessary steps to make sure Legal Notice 277 of 2006 is implemented in a fair and equitable manner for all importers.

Green MT acknowledges the efforts by management and staff at Malta's only Material Recovery Facility operated by WasteServ Malta Limited.  Although there is much more work that needs to be done to establish a realistic and competitive cost of operation to be borne by enterprise, the basis of mutual respect and effort is there, and Green MT acknowledges  that such is the way forward.

The Malta Chamber of Small and Medium Enterprises has left no stone unturned to make sure that our commitment to the Environment is a best practice for Malta's Business Community led by an Organisation that has a vision. The Business Community under the direction of GRTU can clearly say that Green MT is providing services to the Community through direct financing by the same Business Community. These are the real facts. GRTU through continuous discussions with Government continues to stress that such initiatives are only a success if together we want them to be a success. Together we are building history in the way we take responsibility of our waste and manage it.

Government  is now committed to continue to ensure the viability of the Schemes and Green MT is committed to continue to serve the community with the least burden on competitive private enterprise.

Vince Farrugia GRTU's Director General and EESC employers representative has yesterday presented at EESC his final draft report for an EESC opinion in his position as Rapporteur on the Commission Communication on removing cross-border tax obstacles for EU citizens. The paper was very welcomed even by representatives of other institutions.

 

The existence of different tax jurisdictions in the EU may impose an added burden on EU citizens who work, invest and operate across borders because of double taxation and an overlap of administrative requirements among other reasons. General tax rules have been implemented to prevent discrimination between citizens of the EU and to eliminate as much as possible obstacles on the freedom of movement of people, goods, services and capital such as VAT on consumption of goods and services and anti-avoidance general rules. The aim of the Commission is to design tax policies and regulations that promote economic growth and job creation while enhancing competition.

Over the past decade, growth in the movement of goods, services and capital raised more concern on problems associated with cross-border taxation. These are likely to increase if measures are not implemented to lower the barriers as much as possible. The queries highlight the need for simplifications in tax rules and application procedures, enhanced availability of all information related to these rules together with the need to remove language barriers and barriers which hinder cooperation between the authorities involved.

Tax discrimination issues related to nationality and other unjustified restrictions are mainly tackled through EU Treaty rules. However, the current system does not protect EU citizens against various other problems including limited tax information access, double taxation and mismatches occurring from different tax structures. Although it has been widely recognised that complete tax harmonisation is neither desirable nor feasible, measures that lower tax barriers to cross-order business are necessary.

 

Double Taxation

There are various tax obstacles that EU workers and investors face when dealing with Member States other than their home country. Double taxation is one of the main obstacles for cross-border activity and it limits the functions of the Internal Market. Other tax barriers relate to problems in obtaining allowances, tax reliefs and deductions from foreign tax authorities. Moreover, in some cases EU citizens pay higher taxes on foreign income.

Inheritance tax

Different Member States endorse different inheritance tax rules while bilateral tax agreements among Member States are very limited. From all 27 Member States, 18 have an inheritance or estate tax which is specifically paid by the heirs or from the estate of the deceased. Over 80% of these Member States have an inheritance tax while the remaining adopted an estate tax. Denmark is the only Member State with both taxes.

Taxation of dividends paid across borders

Taxes on dividend payments are usually paid in two Member States where cross-border situations are involved. Problems associated with these circumstances include difficulties in relation to tax refunds particularly when various layers of taxation are involved and also where there exist difference in taxes among foreign and local investors.

Vehicle registration and circulation tax

When individuals buy and transfer cars from a Member States which is not their residential country, they face additional taxes such as double registration and/or circulation taxes. A Directive proposed by the Commission in 2005, aims at phasing out car registration taxes while applying a system of refund. Still, there has been no unanimous agreement in this regard.

e-Commerce

Research has shown that around 60% of EU customers find problems in buying goods and services online across borders. In fact, certain transactions are not completed even if customers could save money on the purchase. VAT issues are one of the many tax obstacles discouraging businesses to sell their product to foreign Member States. The availability of a one-stop shop has facilitated trade in this regard and encouragement of broader application of this application is deemed to be a priority.

Next step will be for the paper to be formally approved by the ECO Section next month.

GRTU's Director General Vince Farrugia is one of the five Maltese members at EESC and one of two representing employers. Under the Lisbon Treaty the European Parliament and the EESC are to appoint rapporteurs on important Commission communications. Mr Farrugia has yesterday seen adopted during the 471^st EESC plenary session his first Opinion entrusted to him by the EESC as rapporteur, assisted by Dr Gordon Cordina as expert to the rapporteur. The Opinion was drafted on the European Commission proposal for a regulation on the effective enforcement of budgetary surveillance in the euro area. The paper was voted with a stunning 139 votes in favour, 33 abstentions and 10 against.

Fiscal discipline is essential for long term economic growth but is often jeopardized by short-term considerations, which have recently been heightened by the need to counteract the recession. This represents a considerable threat to the eurozone, particularly due to asymmetric effects on the fiscal sustainability of different Member States and raises further questions regarding the suitability of the Stability and Growth Pact as an instrument of economic convergence.

The European Council in December 2010 proposed an amendment to the Treaty to establish a permanent mechanism to safeguard the stability and economic governance of the euro area by end June 2011. This is to be commended as it would contribute to the gradual restoration of credibility in the euro area. There however remains much work to be done in terms of the practical dimensions of the implementation of these conclusions.

The Commission's proposal on Budgetary Surveillance is part of a legislative package containing the most comprehensive reinforcement of economic governance in the EU and the euro area since the launch of the Economic and Monetary Union. The recently agreed "European semester" will integrate all revised and new surveillance processes into a comprehensive and effective economic policy framework.

The Farrugia Opinion made the following key conclusions and recommendations:

Fiscal rules should take into consideration the issue of quality of Government expenditure

Stronger emphasis is placed on the preventive rather than the corrective arm

Better performing countries would be called to make fiscal consolidation efforts in a manner consistent with their relative size in the monetary area so as to compensate for slower performing ones

The nature and extent of penalties undertaken under the corrective arm are in each case decided and implemented on the basis of a rigorous impact assessment

The Sustainability and Growth Pact is reformed in a manner which provides incentives towards fiscal policy sustainability

Interest on deposits and fines can be claimed back by the MS concerned provided fiscal consolidation is proven

Reform to the budgetary surveillance will result in the development of a mechanism which will serve as the cornerstone in strengthening EU governance and restoring credibility in the euro area

 

Powering cars with plants once seemed like an unstoppable idea. Biofuel was sold as a way to reduce Europe's oil dependency on autocratic regimes, meet climate-change targets and help Europe's struggling farmers. But since the European Union agreed laws to promote biofuel, doubts have sprouted like weeds.

 

 

 

 

 

 

 

 

 

 

 

 

 

Now it looks increasingly likely that the EU will have to rewrite bioenergy laws to guard against their unintended consequences.

The problem that early biofuel enthusiasts did not anticipate was that every change in the natural world has a ripple effect somewhere else. A farmer may decide to sell 100 hectares of corn to a biorefinery instead of to a miller. With no change in land use, the greenhouse-gas emissions caused by the farming activity appear to be the same. The problem arises because the demand for that 100 hectares of food corn has not gone away.

One consequence is that maize prices rise. Another is that a different farmer may expand his farm by 100 hectares by ripping up rainforest or ploughing over biodiverse grasslands. This hidden ripple effect on the environment is known as indirect land-use change, a concept that now has its own acronym – ILUC – as well as a burgeoning scientific literature and numerous political interests.

The European Commission has until July to decide whether to amend EU legislation to take account of ILUC. According to the independent economist charged by the Commission with studying the issue, the need for action is clear. "It is obvious that they cannot neglect the fact that there is a land-use change effect [and] that it can be very strong," says David Laborde, a research fellow at the International Food Policy Research Institute (IFPRI), a research organisation dedicated to ensuring adequate food supplies based in Washington, DC.

Questionable targets

Laborde says that his findings call into question the EU target of deriving 10% of transport fuel from renewable energy by 2020. His work shows that all types of biofuel have land-use effects, but some are more dramatic than others. Biodiesel – fuels from rapeseed, maize or soya – causes more greenhouse-gas emissions than bioethanol, fuels produced from starchy or sugary crops such as sugar cane.

The problem is that Europe's transport system and political incentives are stacked in favour of biodiesel. By 2020 around four-fifths of the demand for biofuel is likely to be met by biodiesel rather than more environmentally friendly bioethanol. European farmers have rushed to plant rapeseed to meet the surge in demand for biodiesel. In contrast, bioethanol, produced in large quantities in Brazil, is subject to steep tariffs at the EU border.

Three options

In May, a draft of Laborde's study will be sent to the Commission's impact assessment board. According to people familiar with the issue, the Commission now faces three options. The first – as in all EU lawmaking – is to do nothing.

This leaves two serious options. One is to add ‘penalty points' to biofuels to counter the risks of indirect land-use change – an approach known as adding an ‘ILUC factor'. The other is to upgrade existing sustainability standards. In 2008 bioenergy legislation, the Commission set green safeguards on biofuel, requiring them to save a certain percentage of greenhouse-gas emissions when compared to fossil fuel (see box). The idea is that these percentage thresholds could be jacked up, thus making it harder for less-green biofuel to qualify – although crucially some so-called sustainable fuels could be exempted from more exacting standards.

The biodiesel industry is fiercely opposed to both these options. Such rules could have "a very detrimental impact on the overall sector". "A penalty would be totally arbitrary and would compromise the investments that have been made relying on the renewables directive. In contrast, Brazil's bioethanol industry sounds bullish. "There are a lot of opportunities. We welcome this debate in Europe. This is a chance for the Brazilian bioethanol industry to demonstrate to the world that we are a global benchmark".

A short history of EU policy on biofuel

Europe is "held hostage by oil" was the portentous conclusion of a green paper from the European Commission in 2000 that urged the EU to turn to biofuel. Biofuel is "very attractive", said the paper, also lauding its low greenhouse-gas emissions and potential to create jobs in depressed rural areas. The paper called for a target of 20% of European transport fuel from alternative fuels (including hydrogen) by 2020, in 2007 this was reduced to 10%.

Written into the legislation were also green safeguards: biofuel must save at least 35% of greenhouse-gas emissions when compared to conventional fossil fuels, and this figure will rise to 50% from 2017. But these safeguards only count direct emissions. Now it seems that 2011 will be the turning point when the EU acts to constrain indirect emissions.

Greece's budget deficit for 2010 was significantly larger than its government had previously estimated, dealing another blow to its attempts to bring its crisis-hit economy under control. The figure for last year was 10.5% of gross domestic product (GDP), according to figures published by Eurostat, the Commission's statistical office, on 26th April.

 

‘Accounting exercise'

The latest figures, although showing an improvement on 2009's 15.4% level, heap further pressure on the Athens government's attempts to improve the country's finances following last May's €110 billion bail-out from the EU and the International Monetary Fund (IMF). Under the conditions of the bail-out, Greece vowed to get its deficit to 7.6% in 2011 and below 3% by 2014.

Public debt

The figures also showed that public debt in Greece had increased to 142.8% of GDP in 2010, from 127.1% in 2009. Eurostat released its figures as part of its twice-yearly publication covering member states with excessive deficits. Portugal has also revised its 2010 deficit level upwards, to 9.1% of GDP compared with 8.6% announced previously.

Tuesday's figures from Eurostat show that the largest government deficits as a percentage of GDP were recorded in Ireland (32.4%) followed by Greece (10.5%), the United Kingdom (10.4%), Spain (9.2%) and Portugal (9.1%).

Ireland's large deficit – more than double the 14.3% level of 2009 – was attributed mainly to huge losses in the country's banking sector, which is now, largely, under state control.

The lowest deficits were recorded in Luxembourg (1.7%), Finland (2.5%) and Denmark (2.7%). Estonia registered a slight government surplus in 2010 (of 0.1%) and Sweden was in balance (0%).

Across the eurozone as a whole, government deficits decreased to an average of 6% of GDP in 2010, compared with 6.3% the year before. But government debt levels as a percentage of GDP increased during 2010 to 85.1% from 79.3%,

The debt figures, which show the government's total borrowing over time rather than the latest annual shortfall, showed Greece is in the worst situation, followed by Italy at 119% of GDP, and Belgium at 96.8%.

The leaders of France and Italy are putting pressure on the European Commission to agree more powers for member states to impose national border controls in the face of an influx of refugees from north Africa. They said that work the Commission has been preparing on Schengen has "to materialise and be intensified rapidly". They also called for "new measures".

 

An emergency meeting of national interior ministers has been scheduled for 12 May to discuss the implications for EU migration policy of the uprisings in the Arab world and the potential influx of migrants to the EU.

France wants to allow national border controls to be re-introduced selectively and to expand the conditions under which these checks could be reinstated. At present, this can only be done temporarily, for reasons of "public order", and requires member states to notify the Commission.

A spokesperson for the Commission yesterday acknowledged the need to clarify and review the Schengen rules "in order to apply them more correctly and more easily and in a spirit of better co-operation between the member states".

One diplomat predicted "hard and painful" negotiations among the EU's member states  about changing the Schengen rules, while another said countries such as Austria, Germany and the Netherlands were in favour of strengthening national controls over the EU's internal borders.

Sarkozy and Berlusconi want changes to the Schengen rules agreed in principle at a summit of the EU's national leaders on 24 June.

The two leaders issued their call on Tuesday after meeting in Rome to resolve a row over an influx of around 25,000 Tunisian migrants given temporary residency by Italy and thereby the freedom to travel across the Schengen area.

France, the preferred destination of  many, denied them entry and set up ad hoc checks on trains arriving from Italy.

MEPs have raised concerns that modifying Schengen would undo the achievement of creating a border-free travel area for more than 400 million citizens and play into the hands of anti-immigration groups.