EU finance chief says capital market reform benefits Germany too

LONDON, April 17 (Reuters) - Despite scepticism in Germany about a need for EU financial liberalisation, some innovative German entrepreneurs struggle to raise funds and would benefit from a more open, pan-EU capital market, EU finance commissioner Jonathan Hill said on Friday.

Asked in a Reuters interview where he saw resistance to his project to reduce national barriers and create a capital markets union, Hill said in countries with strong banking systems close to local businesses some questioned the need for his project.

Pointing to historic success in promoting small business, Germany's savings banks, the Sparkassen, have been cautious on the need for change and wary of disrupting a successful system.

Hill said of his broad consultations with EU business: "When you start to dig down, I think there people would recognise that at different stages in a business's development, businesses are likely to have different needs of different types of capital.

"Risk capital, in Germany for example. I've met quite a lot of entrepreneurs with innovative products that the local banks might thing of being higher risk and actually they're finding it quite hard to get capital. So I think ... that there should be something there that is of interest to all people."

He stressed the European Commission, which he joined as the British government's nominee in November, was taking a "bottom up" approach to capital markets reform, sounding out business and other interested parties -- "because where you've got well functioning local markets you don't want to disrupt things".

So far, he had heard enthusiasm for a freer flow of capital not just from London financiers, whom he addressed at a Reuters Newsmaker event on Friday, but also from ex-communist eastern states which lack their own developed money markets.

Acknowledging the strong interest in the City of London (LSE: CIN.L - news) for Brussels to do more to give powerful, British-based financial firms better access to other parts of the bloc, Hill stressed that his aim was to ensure reforms that would benefit the whole of the EU in the interests of bolstering growth and employment.

"The benefits of getting deeper, more effective capital markets, it should work right across the EU," he said. (Reporting by Alastair Macdonald; @macdonaldrtr, editing by David Evans)