The credit crunch hits Europe:
Dominique Boudier, who runs a printing business outside Paris, received a letter from a key supplier last Friday that her credit line of 20 million euros was being cut in half, effective immediately. When Ms. Boudier picked up the phone to find out why, she was told that the supplier’s credit insurance company had ordered the clampdown.
On Monday, Ms. Boudier’s main supplier followed suit, effectively paralyzing her business.
“We can’t do our job and it has nothing to do with order books,” Ms. Boudier said. “Clients pay on average with a 60-day delay. We just haven’t got the cash flow to pay our suppliers immediately.”
The credit squeeze that had been largely an American phenomenon has arrived in gale force in Europe, transforming the economic outlook across the Atlantic in just a few weeks.
While many individual businesses still maintain solid relations with their lenders, a new level of chaos in credit markets is crimping financing to numerous borrowers across Europe. So far, global interest rate cuts and cash infusions by central banks have provided scant relief.
Ms. Boudier has pleaded with her bank to make up for the sudden shortfall, to no avail. “We can survive this for a week, or a few weeks,” she said, “but beyond that nothing is certain.”
Thomas Serval, chief executive of Barcoda, a company based outside Paris with 40 employees, which develops Bluetooth devices, agreed, saying: “It’s almost impossible to invest for the future in this environment. I’m not sure how long it will last.”
More to come, I’m sure.
