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Risk in Italy and Spain

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An interesting article in the Economist last week highlighted the difficulties the southern european economies will face dragging themselves out of recession. The key to the problem is the strength of the SME’S

Why is this critical and what is the main issue?

Firstly its the share of the economy that is taken by SME’s . In the USA 50% of the workforce work for this sector, in France its  60%, Spain 67% and italy a massive 80%

The problem for these businesses face is the borrowing rates. In Spain and Italy they are a minimum of 6% even though the EU rate is .75%. In France and Germany the rate is around 3.75%

Add to that the complete stagnation of government spending then it is easy to see that this is a double whammy which isn’t going to resolve itself quickly

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