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State expanding

With France, looks to redefine EU standards during presidency

By Michael Heitmann
Staff Writer, The Prague Post
October 24th, 2007 issue

France and the Czech Republic will look to change the definition of small and midsize businesses when they take over the EU presidency in July 2008.
And the only direction the definition can go is, quite obviously, up.
Under their initiative, larger companies could benefit from EU exemptions typically granted to up-and-coming or family businesses. By falling under an expanded definition, large firms could also qualify for generous amounts of state aid, including research funding the European Union has set aside for midsize businesses.
Czech Industry and Trade Minister Martin Říman discussed the issue with his French counterpart on Oct. 12. Hervé Novelli, France’s secretary of state for foreign trade, said the status and importance of small and midsize companies should be acknowledged by defining them more precisely — a process that will also extend the businesses that qualify.
“Both ministers are convinced that the current EU definition is inadequate and should put more emphasis on the financial strength of a company,” said Industry and Trade Ministry spokesman Tomáš Bartovský.
“That way, the group of companies that fall under the definition could be extended,” he said. “If we take a look at the situation in the United States or Asia, it becomes clear that the definition of small and mid-size companies is different than in the EU.”
The countries’ efforts to find a precise definition of what constitutes a small business have not won unilateral praise, derided as “socialist nonsense” by Petr Mach, executive director of the Center for Economics and Politics, a conservative think-tank.
“Such a definition should not exist,” he said. “The same conditions should apply for all, and that means no subsidies and low taxes for all.”
Widening the definition of a small business would do little to address the complex regulatory environments in most EU states that favor bureaucracy and big business, said Weston Stacey, executive director of the American Chamber of Commerce in Prague.
“Unless both states find a way to remove the administrative burdens and reduce the social costs of employing people,” he said, “any initiative to increase the position of small businesses will simply be public relations.”
In 2005, the European Union adopted a new small business definition for that maintained its previous thresholds for personnel but increased the financial ceiling.
Under current EU definitions, a small business has less than 50 full-time employees and a balance sheet of less than 10 million euros (274 million Kč/$14 million); midsize firms may employ up to 250 people with revenue of 50 million euros.
Currently, the European Commission, the EU’s executive arm, is not considering a change in these criteria, said Zuzana Pavlíčková of the Representation of the European Commission in the Czech Republic.
The Association of Small and Medium-Sized Enterprises and Crafts does not welcome any potential increase beyond the 250-employee threshold, said general director Eva Svobodová. But the association is open to discussing the possibility provided it is restricted to specific sectors of the economy, she said.

Michael Heitmann can be reached at mheitmann@praguepost.com


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