Access to credit has become more difficult and the cost of borrowing has risen in the wake of the latest financial crisis to hit Europe, just as economic forecasts had begun to look a little brighter.
Philippe de Buck, director-general of BusinessEurope, speaking yesterday (15 February) ahead of a meeting with the European Council, European Commission, Eurogroup, European Central Bank (ECB) and union representatives, said concerted efforts are needed to restore stability.
"Looking at the recovery, it's precisely at this moment that companies need access to finance. It's a problem for SMEs in particular as they don't have access to bond markets," he said.
He said tough decisions must be made by national governments, and called on the ECB to signal its support for the eurozone economies.
"The very worrying situation in several member states is influencing access to capital but also the cost of capital for companies," de Buck said.
"In the euro zone, what happens in one country influences what happens elsewhere. We need a concerted effort. However, there is no substitute for the necessary adjustment at national level," he added.
De Buck pointed to Ireland, Hungary and Latvia, where governments took difficult measures to deal with sovereign debt crises.
"Credible and decisive actions are the only way to solve these problems," he said, adding that the European Commission must keep up the pressure to ensure member states deliver on national austerity programmes.
The comments came just as the EU executive published plans to beef up its audit powers to ensure the reliability of government finance statistics. The move represents a response to inaccurate data supplied to Brussels by the Greek authorities, which downplayed the extent of the crisis last year.
Economic outlook improving but still fragile
BusinessEurope yesterday presented its economic forecast, which offered a mixed picture for 2010. Confidence is improving and GDP could grow by around 1.2% this year thanks to resurgent global trade.
However, mounting public debts will constrain the recovery and Europe's weakened banking sector might be unable to expand credit to support new investments. Europe is lagging behind the global economic upturn, according to the forecast.
The fragility of public finances and recent speculative attacks on the euro are taking a toll on an otherwise brightening outlook, BusinessEurope said.
However, de Buck said the low euro has some benefits for European growth. "As we are export-oriented, the lower euro helps. The difficulty for governments is volatility – we will not complain about the level the euro is at now," he said.
The forecast says public interventions in the economy are reaching their limit, but warned that with private investment continuing to contract, the prospects for job creation are bleak.
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