Small Firms Cast Large Cloud Over a European Comeback

Raffaella Prestinoni's sweaters business in Varese used to be one of the millions of family-run companies anchoring the European economy. Today, companies such as hers threaten to dent the Continent's recovery, The Wall Street Journal reported. Heavily dependent upon hard-to-get bank loans and shut out of Europe's embryonic corporate-bond market, small and medium businesses here have been hit hard. The result: widespread insolvencies, job losses and a cloud over Europe's growth prospects in 2010. As important as small businesses are to the U.S. economy, the problem may be even more acute in Europe. Companies with fewer than 250 workers account for 70% of the private-sector work force in the European Union, compared with 49% in the U.S., according to EU figures. Business also relies more on banks in Europe than in the U.S. where, at least for bigger firms, capital markets are an important source of finance. Read more. (Subscription required.)