Access to credit gives firms upper hand amid threat of bankruptcies

Europe is caught at the centre of a hard landing in the global economy. As an export-oriented region (exports represent 44% of GDP ), the eurozone is feeling the full force of collapsing global demand.

Today's production chains are more closely integrated than they were in the past, and therefore negative-demand shocks are transmitted much faster. This was borne out by a sharp fall-off in the Q4 GDP figures, which showed the eurozone contracting at an annualised rate of 6%. This contraction has continued into Q1 2009, exacerbated by a need to reduce inventories. Even where end demand is stabilising, production is still being cut sharply to reduce excess inventories. For example, in the auto sector, new car registrations fell by 22% in the first two months of the year. However, producti...