Hedge funds and Private Equity - PES

82
Main conclusions:
The total European average, at 1.84, indicates that the tax and legal environment create more
and more incentives for private equity and venture capital in Europe.
The gap between the best country average at 1.27 and the European average at 1.84 is
smaller than the 2004 gap (1.26/1.97), However, the composite score of the lowest country
in ranking (2.35) is not closer to the European average (1 .84) than the measured gap in
2004 (2.49/1.97). This means that, overall, a certain convergence is taking place in the upper
part of the table but that less mature countries still have a long way to go. This is how it looks
unless we consider instead our common interest in protecting our welfare states including
our tax revenues. Here, we are way off. But we have clear goals as defined by our Lisbon
strategies.
On the European situation as a whole, the EVCA makes the following points as far as circumstances
for LBO operations look:
The European average for domestic fund structures is good, at 1.47. Most of the countries
assessed have taken steps towards having an appropriate fund structure available in the
country to attract capital from domestic and international limited partners.
Also favourable are the environments for pension funds and insurance companies to invest in
private equity and venture capital, with European averages of 1.55 and 1.42 respectively.
Most countries allow those institutional investors to invest in the asset class and many of the
previously existing obstacles have been abolished over the past four years.
Very few countries are providing incentives to encourage investment in LBOs, leading to a
European average of 2.04.
As the LBO see it , Europe provides a very unfavourable environment for both company incentivisation
and Fiscal R&D incentives, with European averages of 2.36 and 2.13 respectively.
From our point of view, societies’ interest and our common interest in assuring a sustainable
financing of the real economy, we lack:
Adequate protection of pension funds as investors in LBOs
Adequate incentives and rules which can ensure companies’ comparative capability in the
global economy through long-term investments.
Sufficient regulations to ensure improved qualifications for employees
The role of the social partners
The financing of our welfare societies through taxation
The lack of coherence between different national regulations is a major problem considering the
international nature of the phenomenon, but the lack of a common direction is even worse.
The Socialist Group in the European Parliament and the PES have recently, in our reports,
“Europe of excellence” and “New Social Europe”, underlined that Europe is not about competition
among states, but among other things about assuring fair and transparent competition
among companies within the single market. And Europe is about making progress for our
common goals, the Lisbon goals. The main conclusions to be drawn form the trends described
above is that there is on-going liberalisation and deregulation in order to attract funds and investments.
And worse: without a corollary in terms of risks involved, social costs, innovation
promotion and investor protection.