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The Euro Area's Myriad Small Companies Finally Join the Recovery

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The good times are back for the legion of smaller companies that make up the backbone of the euro-area economy.

The European Central Bank said Wednesday that small and medium-sized enterprises are reporting higher profits for the first time since it started polling them in 2009. Even in Greece, a net majority of SMEs are reporting an increase in turnover.

The report is an important addition to the picture of an economy in rude health as ECB stimulus feeds through to companies and households. SMEs, largely reliant on bank finance, were harder hit than most by the crisis as lenders deleveraged.

The small size of such companies keeps them out of the capital markets, and so denies them the cheap funding via corporate debt that the ECB’s asset-purchase program has helped deliver.

There are signs of improvement on bank financing. The ECB’s Bank Lending Survey for the third quarter reported higher demand for loans from almost a quarter of SMEs, while only 8 percent reduced demand.

The European Union’s statistics agency defines SMEs as businesses with fewer than 250 workers. Back in 2012 it said that such firms contributed almost 60 percent of the European Union’s gross value added and employed more than two third of the region’s workforce.

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