The Executioner Approach? State Causes 90% Of Small Business Bankruptcies

• Nita: "Banks have done nothing for small- and medium-sized enterprises"

Approximately 90% of the bankruptcies among small- and medium-sized enterprises were caused by State-ordered distraints, according to Constantin Nita, Minister for Small- and Medium-Sized Enterprises, Trade and Business, who told the information to an economic debate yesterday.

According to data from the National Office of the Registry of Companies, no less than 4,498 companies were struck off the Registry in January alone. The minister said that industries and construction were the most severely affected by the economic and financial crisis and stressed it was "disturbing" to see that the State was responsible for 90% of the bankruptcies and insolvency cases among small- and medium-sized enterprises.

"We will soon have talks with representatives of the business community and the fiscal authorities to improve the situation," Nita said. During the debate, the minister voiced harsh criticism against Romanian-based banks and especially the 22 banks in the National SME Credit Guarantee Fund. The minister stressed that the banks had not prepared any special packages to help small- and medium-sized enterprises during the crisis. "The banks have done nothing about it. I even wonder why they call themselves banks as long as they don"t give loans and they haven"t prepared anything for small- and medium-sized enterprises," Nita said.

The minister said that the SMEs had repeatedly requested that banks be more lenient regarding the payment of their loans. "The businesspeople do not object to paying the interest, but are asking that the instalments be rescheduled over a year and a half. That shouldn"t be too big a problem for the banks. The problem is that banks are showing no flexibility towards what is happening in the economy," Nita added.

The minister also responded to those contesting the decision to capitalize CEC and Eximbank - especially financial consultant Bogdan Baltazar, who said on Monday that "the capitalization process is ridiculous and displays great conceptual mistakes." The minister responded: "Eventually, CEC and Eximbank are the only State-controlled banks left in Romania. Under the current circumstances, when no one on the banking market is giving loans anymore, we have a duty to capitalize the two banks and to enable them to support the economy. The State has a duty to become involved during a crisis and to support the Romanian economy."

• Optimistic expectations from counter-guarantee scheme

The minister commented that the number of companies able to access guarantees will increase four-fold or even five-fold following the establishment of a counter-guarantee fund. Nita stressed that the Ministry would support both the guarantee fund and the counter-guarantee fund. The latter will have a share capital of 100 million EUR and is intended to help the business environment overcome the crisis. "We will analyze how things are going and, in the second half of the year, we will consider increasing the counter-guarantee fund, if necessary," the minister added.

• 62% increase in the value of guarantees

The National SME Credit Guarantee Fund (FNGCIMM) estimates that the overall value of the guarantees to be issued this year will be 62% higher than in 2008. According to a FNGCIMM report, some 870 million RON worth of credit guarantees were issued last year, while the projection for this year is 1.4 billion RON. The report indicates that the overall value of the loans taken by SMEs in 2008 was 1.72 billion RON, while the projection for this year is 2.78 billion RON.

"We have decided to issue irrevocable, express and unconditional guarantees for up to 80% of the loans, which is the maximum level allowed by the E.U. It should be said that the E.U. average is 60%," said Aurel Saramet, President of FNGCIMM. He added that loans issued by commercial banks to SMEs for priority projects or for co-financing E.U. loans could be guaranteed up to 100% based on an agreement with Eximbank.

"In order to prevent any possible blockage in SME lending as a result of overdue debts to the State, the Fund guarantees financing issued to settle such debts. That leads to improved State tax collection and new jobs," Saramet explained. He stressed that FNGCIMM was the financial institution with the lowest risk rate, because it was not profit-oriented.

Other solutions that FNGCIMM proposed to the business environment include a subsidy for exchange rate losses (for forex-denominated loans), guarantees for loans restructured as a result of the collapse of the real estate market or guarantees for loans taken to refinance existing loans of SMEs facing temporary payment problems.