Tuesday, May 29, 2012

Down With Small Business


Wall Street Journal ^ | May 29, 2012



European leaders failed to make much headway in solving the euro crisis at their informal summit in Brussels last week. But they did agree on one thing: more government lending for small businesses, in the form of increased credit from the European Investment Bank. Such support has become the politically correct way for governments to help entrepreneurs without seeming to be on the side of "big business."
Now, we're all for small business. But from the perspective of job creation on a national scale, the best small businesses are those that grow into big ones—the proverbial garage start-up that becomes a blue chip. And this, for all the pieties about helping small business, is a problem European leaders haven't solved.

Take Spain, where unemployment runs north of 24%. Nearly 40% of private workers in Spain are employed by "micro companies," with fewer than 10 employees. That's against average EU micro-employment of 29.7%, and 11% in the U.S. Spain has also captured the single-largest chunk of European Investment Bank financing for small businesses since 2008—15.8% of the total. This month alone, the EIB announced €400 million in new loans for small and mid-size Spanish firms. And in December Bankia said it would roll a €1 billion taxpayer-backed liquidity injection into small- and mid-cap loans within two years.

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