Transcript Folie 1 - *** EUROPE'S 500

Europe‘s 500 Growth Policy
Martin Schoeller, President Europe‘s 500
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Europe's 500 Entrepreneurs for Growth
Average E’500 company
177 € mill
796
48%
Revenues p.a.
Employees
3-year growth
Total increase in employees in 3 years
130.0000
Objectives:
Networking and
Contribute political ideas
Awareness for Entrepreneurship
Activities
E’500 Awards,
E’500 Conference,
European round table
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Activities Europe‘s 500
Generates ideas for
Growth
Europe‘s 500
Conference
for Growth
annualy
Selects Top Growth
Entrepreneurs
Proposals for
Improvement
European
Round Table
For Growth
1-2 per year
Europe‘s 500
Listing
annualy
Better Conditions for Growth
Generate more Growth Entrepreneurs
3
Europe‘s 500 Growth Policy
1. Growth financing : risk insurances
2. Fiscal Incentives for Innovation: for Business Angels and R&D
3. Entrepreneur education and awareness
4. Part-time job incentives
5. Trade policy: incentives to stimulate demand in developing countries
4
Gap between Bank Loan and Private Equity
Cost of
capital
Private
Equity
20 – 40 %
Bank loan
4 – 8%
Predominant number of German
medium-sized companies
Decreasing credit rating
Increasing risk
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Problems of Growth Companies < € 50 Mio
Bank Loan
Alternative financing
Venture Capital  30%
. .
Mezzanine  too small
. .
Loan programmes 
. .
Rating
Margin
Costs of losses after Basel II
8,00%
4,75%
2,80%
0,50%
0,60%
0,75%
0,90%
VI
VII
VIII
IX
Rating
X
XI
XII
• 50 – 80%
• more work, less success
• 20 – 50%
bank quota required,
but banks are reluctant
to finance the rest
Source: CRE Center for Risk & Evaluation
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Crack in Logic with Basel II
Example
medium risk
low risk
EVCA (22.10.2003)
“There is a risk that instead of
fulfilling its original purpose of
providing stability to banks
and thus sustainable growth,
the accord in its current form
risks impeding innovation
and opportunities for
businesses willing to
finance European growth
companies.“
100%
Bundesverband deutscher
Banken (Januar 2003)
2% Margin
1% Loss
„…Kapitalmarktprodukte
vorantreiben, die es ermöglichen,
Risiken aufzuteilen und denjenigen
anzubieten, die bereit sind, diese
Risiken zu tragen.“
=1% Net
margin
50%
3% Margin
2% Loss
=1% Net
margin
8%
Conclusion
16%
After Basel II banks operating at medium risk will earn
substantially less than those banks operating at low risk
- assuming an equal net margin
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Response Citigroup to CP3 New Basel Capital Accord
Capital is mistakenly defined to cover both Expected and Unexpected Losses
“The New Accord sets capital requirements to cover both Expected Losses and
Unexpected Losses without differentiating between the two.
However, the definition of capital is not changed to reflect the provisioning that
supports Expected Losses and the margins that act as additional buffers against
losses.
….. A further regulatory capital charge would double count this exposure.”
Todd S. Thomson, CFO Citigroup, 31.07.2003
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Credit – Crunch in Germany
Credit facilities to companies
change to previous year
€ mill
No of Unemployed
mill
55.875
26.700
-21.008
-25.103
-34.541
3,9
3,9
4,1
4,4
4,4
2000
2001
2002
2003
2004
70.000
4,5
60.000
4,4
50.000
4,3
40.000
4,2
30.000
4,1
20.000
4,0
10.000
No of Unemployed in mill
3,9
0
-10.000
Credit facilities change to
previous year in € mill
2000
2001
2002
2003
2004
3,8
-20.000
3,7
-30.000
3,6
-40.000
3,5
Source: Deutsche Bundesbank
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Growth Financing at adequate Risk
All medium sized companies up to Rating XI (97% of all German companies)
obtain loans at a pricing of:
Rating
Percentage
of Companies
Initial cost
(Libor 1 Year)
+ Handling Fee
+ Cost of Guaranty
Total
I-V
51,5%
1,8%
1,2%
1,4%
4,4%
VI
15,2%
1,8%
1,2%
1,5%
4,5%
VII
10,9%
1,8%
1,2%
1,6%
4,6%
VIII
10,7%
1,8%
1,2%
1,8%
4,8%
IX
4,6%
1,8%
1,2%
1,9%
4,9%
X
2,7%
1,8%
1,2%
4,8%
7,8%
XI
1,6%
1,8%
1,2%
6,8%
9,8%
*) Source CRE Center for Risk & Evaluation
 enabling increasing growth again
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Loan Growth generates higher GDP growth
Spain
Italy
France
Germany
2003
2004
2005
Growth GDP
3,0%
3,1%
3,4%
Growth Loans
13,5%
19,8%
21,1%
Growth GDP
3,0%
1,2%
2,0%
Growth Loans
-7,7%
-4,6%
3,5%
Growth GDP
0,8%
2,3%
1,5%
Growth Loans
-2,6%
6,0%
4,6%
Growth GDP
-0,2%
1,6%
0,8%
Growth Loans
-3,2%
-3,3%
-0,9%
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Loan Growth generates higher GDP growth
Growth GDP 2005
4,0%
Spain
3,5%
3,0%
2,5%
Italy
2,0%
1,5%
France
1,0%
0,5%
Germany
0,0%
-0,9%
3,5%
4,6%
21,1%
Growth Loans 2005
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A possible Solution
Entrepreneurs can rent guarantees at a price that correlates
to their risk (rating) and borrowing capacity
e.g. up to 4.5 x EBITDA
No risk participation of commercial bank required
EU does not restrict this because of „true cover“ and
recommends a guaranty renting system to the member states
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Europe‘s 500 Growth Policy
1. Growth financing : risk insurances
2. Fiscal Incentives for Innovation: for Business Angels and R&D
3. Entrepreneur education and awareness
4. Part-time job incentives
5. Trade policy: incentives to stimulate demand in developing countries
14
Tax Incentives for Innovation
Capital gains for Business Angels should be tax free
(like capital gains on shares)
Instruments in R&D should give tax benefits for SME,
as long as it is connected in IP generation
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Europe‘s 500 Growth Policy
1. Growth financing : risk insurances
2. Fiscal Incentives for Innovation: for Business Angels and R&D
3. Entrepreneur education and awareness
4. Part-time job incentives
5. Trade policy: incentives to stimulate demand in developing countries
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Entrepreneur Education and Awareness
Increase Entrepreneurship as a discipline at Business Universities
(Teach the Teachers)
The annual Award Listing, Ceremony and Conference of Europe‘s 500
would like to apply for EU sponsorship
Europe‘s 500 is capable of organizing top 50 events in various
European countries.
This could also be organized in cooperation with the Commission.
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Europe‘s 500 Growth Policy
1. Growth financing : risk insurances
2. Fiscal Incentives for Innovation: for Business Angels and R&D
3. Entrepreneur education and awareness
4. Part-time job incentives
5. Trade policy: incentives to stimulate demand in developing countries
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Part Time Jobs reduce Unemployment/social Charges
Unemployment rate
UER
11%
Non wage labour costs
UNDERPERFORMERS
(GE, FR, IT, ES, BE)
Net Employment Rate
51%
30%
adjusted
UER
9,2%
9%
60%
SCANDINAVIA
(SW, FI, DK)
7%
UER
6,8%
TOP PERFORMERS
(UK, NL)
CH, AU
20%
57%
68%
5%
UER
4,7%
UER
4,2%
3%
10%
10%
20%
30%
40%
Part-time rate
Source: Eurostat
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Incentives for more Part-Time Jobs
leads to less unemployment
fills a need for more part-time jobs
allows substantial cut of non wage labour costs
improves competitiveness and adaptability of enterprises
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Europe‘s 500 Growth Policy
1. Growth financing : risk insurances
2. Fiscal Incentives for Innovation: for Business Angels and R&D
3. Entrepreneur education and awareness
4. Part-time job incentives
5. Trade policy: incentives to stimulate demand in developing countries
21
The Problem……
Economic policy made simple
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Relocation and Outsourcing to low Wage Countries
reduces jobs and purchase power in Europe
quite often does not increase wealth in the exporting
developing countries
we import much more from Asia, Latin America, Africa
than we export to them
2004 in € bn
Europe 15
Asia
Latin America
Africa
Imports from
-322
-55
-86
Exports to
253
47
75
Balance
-69
-8
-11
23
Fair wages – Net foreign trade
Balance
EU 15
in € bn
2000
2004 Growth
2000
USA
2004 Growth
Eastern Europe
Import to EU
-199
-154
-23%
Import to EU
-55
-78
42%
Export from EU
232
33
228
74
-2%
Export from EU
28
-27
55
-23
96%
74
-23
Latin America
Japan
Import to EU
-49
-55
12%
Import to EU
-87
-69
-21%
Export from EU
55
6
47
-8
-15%
Export from EU
Balance Japan
45
-42
43
-26
-4%
-8
-26
Africa
China excl. HK
Import to EU
-84
-86
2%
Import to EU
-70
-118
69%
Export from EU
66
-18
75
-11
14%
Export from EU
25
-45
47
-71
88%
Import to EU
-322
-307
-5%
Export from EU
253
-69
272
-35
8%
-11
-71
Rest of Asia
-35
Source: Eurostat
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A possible improvement
Exporters to Europe are required to gradually lift minimum
wages as well as environmental and social standards
fight poverty
creates growth of internal demand
protects environment
Incentives and restrictions in order to enforce it
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Summary of Europe‘s 500 Suggestions
1.
True cover credit insurance for growth Entrepreneurs
2.
Tax incentives for Business Angels and R&D
3.
Entrepreneurship chairs and growth Entrepreneur Awards
4.
Part time jobs with much less non wage labour costs across
all levels
5.
Low-wage countries: incentives to increase minimum wages
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