EU Needs Pan-European Venture Capital

BRUSSELS (03/09/2000) - Europe's lead over the U.S. in mobile telecommunications and digital television provide it with the opportunity to take the lead in electronic commerce, Erkki Liikanen, European Information Society Commissioner, said during a press conference today.

However, this potential is seriously undermined by Europe's lag in the development of venture capital necessary to finance innovative startup companies, he warned.

"Our areas of strength are the ones for the future, but the U.S. strength lies in venture capital," the Commissioner said during the press conference, called to release the progress report on "eEurope: An Information Society for All."

The European Commission launched the "eEurope" initiative last December with a view to plugging all citizens and businesses into the Internet.

The Commissioner made these comments as he prepares for the upcoming meeting of the European Council in Lisbon, which brings together heads of state and government from the 15 member states of the European Union. EU leaders will discuss ways to improve industrial competitiveness, including the importance of wiring the EU, correcting the gap in information technology skills that plagues EU industry and improving the general business environment by encouraging venture capital, revising tax regimes and looking into restrictive laws on bankruptcy which penalize risk-taking. The event will be held on March 23 and 24.

Without a pan-European venture capital market to provide seed capital for new companies, the Commission fears that entrepreneurs will continue to move across the Atlantic.

This negative attitude toward risk-taking extends to the European views on bankruptcy, the Commissioner explained. Indeed, in Europe, entrepreneurs are allowed neither to succeed nor to fail, according to the Commissioner.

In contrast he compared the situation to the U.S. where "entrepreneurs must fail once before they are taken seriously," he said.

"This means that in Europe we are losing opportunities," he added.

These attitudes, which are cemented in laws, make it very difficult for someone who has failed with one company to start up another, he explained.

As a first step towards changing mentalities, the Commissioner hopes to convince EU leaders and their industry ministers to launch a major benchmarking exercise to determine the full cost of setting up a company in the EU including all the administrative, legal and fiscal hurdles that entrepreneurs face in the EU.

A Commission report on "The New Economy" reveals that setting up a company in the EU costs close to US$2,000 and takes three months, while in the U.S. it costs $200 and takes two weeks.

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