The EU has unveiled a new plan to encourage companies to tap difference sources of investment.
The European Commission says firms rely too heavily on banks for funding.
It reckons they should explore alternatives, such as venture capital.
The end goal would be to create a single European market for raising capital.
“In the US, SMIs get about five times as much funding from the capital markets or non-bank financing as they do here in the EU. And if our venture capital markets were as well developped as they are in the US companies could have raised an extra 90 billion euros over the past five years,” said Britain’s Jonathan Hill, the EU commissioner for financial stability.
A top Green lawmaker warns, however, of the potential moral hazard of such a scheme.
“Small and medium size businesses might get better access to finance which is positive. On the other hand we must be very careful that not the tax payer has to step in agian if banks get into trouble or insurance companies get into trouble because they receive goodies from Mister Hill,” said Sven Gielgold, a German parliamentarian.
For now, it is just a proposal.
It would need the final approval of MEPs and EU governments before it could become reality.
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