Banks hoard European funds intended for SMEs

Newsroom 06/07/2009 | 16:15

Since the financial crisis hit towards the end of last year, both Romanian and international experts have said that European funds can be the life-buoy of the local economy. The EU has given its approval to financially supporting local energy efficiency projects, for instance, as well as small and medium-sized enterprises (SMEs). Moreover, international financial institutions such as the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) have announced that they have given millions of euro in credit lines to local banks to support SMEs through the financial crisis.
This year, the EBRD gave a senior loan of EUR 100 million to Banca Comerciala Romana (BCR) to be on-lent to SMEs in Romania. The proceeds will be used by BCR to provide medium- and long-term financing to private companies for production, investment, trade, services and working capital needs.
The same purpose was voiced in December last year when, again the EBRD, approved a EUR 100 million loan to Banca Transilvania. At the time, EBRD officials said that the money would continue providing SME loans, thus ensuring continued funding was available to small firms in a period when access to bank finance has become more limited. More than 7,500 current active SME clients were to benefit from the funds. EBRD officials said the bank would increase its investments in Romania by EUR 500 million to EUR 1 billion over the next two years as part of an international EUR 20 billion financial support package. Approximately half of this sum will go to the financial sector, and the rest invested across the broader economy, including in the corporate, energy and energy efficiency and national and municipal infrastructure sectors.
To sum up, the cash was to start from the international financial institutions, pass through banks and go to SMEs or particular projects, like energy efficiency or infrastructure. But while things started as they were meant to, the progress did not continue.
Given the current status of the real economy and the new taxes imposed by the current government, like the forfeiture tax, it cannot be said that micro and SMEs have rushed to increase their debt in this period.

Follow the money
Market analysts believe that the funds simply ensured banks' solvency.
“At the request of the EC, the EBRD and EIB gave credit lines to EU commercial banks to lend to SMEs. It is clear that the lending process has not restarted in Romania. In France, in October last year, a new institution was formed – the loans mediator – which facilitated dialogue between banks and SMEs. It favorably resolved 4,000 cases and saved 40,000 jobs. The Romanian Association of Businesspeople (AOAR) has been calling on the government and banks to set up a similar body for six months, but to no avail. Obviously banks are using all the resources attracted to ensure their solvency. No one can intervene, except the EBRD or EIB, which surprisingly are saying nothing. These international financial institutions can ask questions about how this money is spent,” Cristian Parvan, general secretary of AOAR, told Business Review.
Indeed the EBRD and the EIB have not made any assessment of how the loans are used. But such an evaluation will come from the European Commission. The EC will act at the request of the European Parliament to publish a report on the management and use of European funds in Romania, said Mark Gray, spokesperson for the EC, without specifying when such a report could be made official.
“The EC will publish two reports, one on the verification mechanism and cooperation in Justice, another one for the use of the EU funds on two different dates. The EP asked the Commission a special report on the administration and use of European funds in Romania and Bulgaria and the progress made in the anti-corruption fight by July 15,” said Gray.
Government sources have indicated to local media that that the Romanian government is also preparing a report on the management and use of European funds.

Small steps to energy efficiency
The Energy Efficiency Financial Facility (EEFF) is a credit line of EUR 80 million given by the EU and the EBRD to support energy efficiency projects in the private sector. EEFF officials have said that, so far, the necessary documentation has been finalized for about 33 investment projects worth EUR 72 million, out of which some EUR 32 million is eligible for EEFF funding.
“Credit applications are ranging from very small amounts, such as an investment of EUR 50,000 for a boiler replacement, to funds for a cogeneration plant, an investment which could reach EUR 10 million, of which EUR 2.5 million is eligible to be financed by theEEFF. A series of loan applications have been approved so far, for energy efficiency investments in Mures, Prahova, Buzau, Braila, Bihor, Bacau and Ialomita counties,” Geo Scripcariu, communications manager at the EU/EBRD Energy Efficiency Finance Facility, told BR.
He added: “One of the investments, the repair of an industrial hall, was fully completed in February this year. Independent verification took place in March, and the 15 percent grant for the investment was paid by the EBRD in early April. Another example is the replacement of old equipment in a low and medium voltage factory with plasma equipment and computerized control.”
It remains to be seen how eager Romanians are to use these funds, as the EEFF is on the table until the middle of next year.

By Dana Ciuraru

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