European policy makers are worried that enterprise capital in their area is falling further behind the growth in the market in the US.ÿ

Despite a near doubling of the market within a year as measured by assets under management of venture capitalists, the EU is still far behind the US. But does the slowing growth reflect lesser entrepreneurial skills of Europeans versus the Americans, or malfunctioning European policies?

A Risk Capital Action Plan (RCAP) that has been drawn up by the European Commission is now being implemented with greater speed for Europe to catch up with the United States. The overall emphasis of the plan is facilitating investment and stimulating risk capital.

But in catching up with the US, Europe is not only faced with a more pronounced downturn and increased economic uncertainty than last year, but also with the task of bringing plans to bear that not only speed up venture capital, but also erase borders at the same time. Once the ambitious RCAP has been totally implemented, Europe's risk capital industry should not only exist, but function in an environment of full cross-border market integration. Not an easy objective to fulfil by 2003.ÿ

Measures taken so far to speed up the development of the risk capital market in Europe have paid off, in that the market has grown more significantly than before but still, Europe's falling behind the US, despite the greater slowdown of the overall US economy.

The RCAP went underway in 1998 but it is way behind in achieving the targets set for 2003, according to a midterm review by the European Commission. Why is this? Some countries have not been very successful at implementing targets, but more significant is the general slowness of the adoption of wider proposals on a supranational, or EU level, such as those on an EU patent and on supplementary pension funds.ÿ

Although interest from institutional investors led to a near doubling within a year of the total assets of venture capital funds to almost EUR 20 billion, the U.S. scene far outshone this growth; investment by the US venture capital industry was around twice that of Europe in 1998, and has continued to expand more rapidly -- to three times the level of Europe's in 1999 and four times larger last year.ÿ

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