Walesbusiness.org

The financial crisis in Europe has become so severe that it has put the future of the euro, and indeed the future of the EU itself, in doubt. If the financial system in Europe collapses, it is going to plunge the entire globe into chaos.

If the financial system in Europe breaks down, we are all doomed. An economic collapse in Europe would unleash a financial tsunami that would sweep across the globe. The nightmarish sovereign debt crisis in Europe could potentially bring about the end of the euro. The future of the monetary union in Europe is being questioned all over the continent. Without massive bailouts, there are at least five or six nations in Europe that will likely soon default.

So it might seem a bit odd to write an article looking on the ‘bright side’ (so to speak), but that’s what I thought I’d do. I wanted to pen something that worked on the assumption that we all got through to the other side in – relatively – one piece.

I’d actually like to rewind to March 2004 when the heads of state of the EU member states met for the European Council and set the strategic goal for the EU “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”.

However, these admirable objectives fell woefully short of realisation, even before the economic turbulence of 2008. Much of this was down to a lack of action in reducing regulatory burdens.

The European Charter for Small Enterprises identified ten key areas of action to help small businesses prosper and was adopted by the European Council in Feria, Portugal in 2002 and followed on from the Lisbon Agenda. The overarching principle of these various accords was to recognise the important role that small businesses played in the European Economy.

Whilst this was a step in the right direction, in reality that was pretty much all it turned out to be. Enterprise policy continued to be made in a vacuum and these agendas were rarely adopted throughout the various Commission Departments and across all EU institutions.

So should the EU get the other side of its current nightmarish scenario, it needs to outline a ‘New Deal’ for its dealings with the private sector. Previously, for example, there has been much debate and criticism of the way the European Union has consulted with stakeholders, and in particular the fact that SMEs are not well represented and their views are all too often ignored.

In future, the EU needs to consider the needs of SMEs in four key areas: firstly by organising periodical SME round tables with the TUC also being present, and to organise market research of SMEs on issues that the Commission is consulting on prior to a formal invitation to the Social Partners to negotiate an agreement.

Secondly, it should improve the conduct of the social dialogue by making it more transparent and accountable. This would be achieved by direct market research of SMEs and a longer time being allocated for consultation and an increased number of organisations being consulted.

Thirdly, it needs to create a new SME forum at the EU level with advisory status which would be restricted to Employment and Social Affairs in order to give substance to Article 137(2) of the EU Treaty that states Directives “Shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of SMEs”, a principle that is often ignored.

And finally, a new social dialogue committee should be established where, unless a piece of legislation passes through this forum, SMEs in the European Union would not be bound by that piece of legislation.

There has long been a wide recognition of the need to improve dialogue with SMEs. The European Commission has developed several policies most notably: the European Small Business Charter, The Green Paper and the follow up Action Plan on Entrepreneurship, and the Better Regulation Action Plan.

These policies have all devised ways of improving dialogue with SMEs including the appointment of an SME Envoy, and the introduction of Impact Assessments to inform policy options.

Yet in spite of these efforts SMEs were still being ignored in favour of social and environmental lobbies. Rather than pay lip service to these concerns, politicians and policy makers need to enter the private sector mindset at all stages of the policy process.

For example, pre-2007 the burden of red tape had greatly increased. While individual laws may not be over burdensome on their own, the cumulative effect can be overwhelming. This is particularly the case with laws relating to health and safety, employment and the environment. Compliance costs can be enormous and have a disproportionate impact on small businesses that are invariably placed at a competitive disadvantage to their larger competitors.

Moreover, there were huge inconsistencies within legislation that made it impossible for businesses to know what there rights and responsibilities were. Therefore, it is about time that there is a review of all existing EU legislation to remove the burdens and inconsistencies. In future, legislation should contain review and sunset clauses and Regulatory Impact Post-Implementation Assessment (RIPIA) should be completed to check that the legislation is doing what it set out to do.