Europe as a whole might avoid a recession this year and there were reasons to be more upbeat about prospects for the region, Business Day quoted International Monetary Fund (IMF) head Christine Lagarde as saying. She went on to declare that the Eurozone comprised of very different economies cruising at different growth rates meaning that while some areas may suffer more than others, an all-out EU recession was unlikely.
And with the practice of more effective bailout mechanisms – conditions have indeed much improved. In actual fact reports coming out of the European Central Bank state that financial institutions across the continent have stored record levels of funds in order to meet the terms of new regulations.
So, taxpayers are safe from having to put their hands in their pockets again in the event of another banking industry collapse – but what about these economies’ growth engines? The all important legion of employers – the Small Business (SMB) Community?
One thing is for sure, SMBs across Europe are pretty much over the ongoing pessimism surrounding the Eurozone crisis and news agenda. In this sense, they are likely to welcome Christine Lagarde’s comments. The general mood, it would appear is shifting from one of recession to one of moderate growth ambitions .
But even moderate growth requires a certain amount of investment and with financial institutions having to bank more capital there will inevitably be less to go around. We know from the Sage Business Index, that SMBs’ biggest gripe revolves around access to finance.
Perhaps it’s time for big brother to step in again and in the same way the Government pushed for regulations such as Basel III – which requires banks to hold more capital, it could also press for less rigidity in lending to SMBs.
Flexibility of this kind will enable SMBs to prepare a targeted cashflow solution that will help set them up for growth, albeit moderate in 2012. And that is all they are asking for.