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Italy offers banks a $15.5 billion lifeline

A caveat: More credit must go to small firms. Obama is also pushing aid to small businesses.

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Those measures, however, were mostly aimed at helping banks that had invested in so-called toxic assets. With the notable exception of Unicredit, whose stability is endangered by investments in Eastern Europe, Italian banks have been less exposed to the credit crunch because of their relatively conservative business approaches, analysts say.

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Offering Italy's banks a stimulus lifeline is a wise idea, says Mr. Colli, especially with the condition that the banks must free up additional credit for small firms. "Giving banks money and letting them keep it would be simply useless."

Although Italy might be better known abroad for huge fashion houses, Europe's fourth-largest economy heavily relies on small, family-owned firms in highly specialized sectors, such as precision machinery, electrical goods, chemicals, pharmaceuticals, and motors. Once strong and successful, those small firms are now in bad shape, says Franco Amatori, a professor of economic history at Bocconi: "While the world economy went global and large multinationals became dominant, Italy has simply lost the train. Here, big business doesn't exist, outside the utilities sector."

In times of crisis, a system based on small firms can be beneficial: Italy's small firms have a tradition of self-financing, says Colli, and are thus less directly affected by the credit crunch.

On the other hand, small firms are less likely to ensure their contractual rights are respected, which can be especially harmful during times of worldwide crisis. "It's like playing in a minor league team while the rest of the world is in the NBA," explains Mr. Amatori. "That's why now they are in bad need of financial policies specifically aimed at them." The professor says he is skeptical, though, about the way to ensure banks will respect their obligations.

Highly specialized technology firms, which tend to do business mostly with large corporations, are now particularly exposed. Bruno Silani, an entrepreneur who produces components for airport traffic control, argues that small firms' major problem with liquidity does not lie in banks holding back loans, but rather in the difficulty of obtaining payments from large customers.

Like many of others operating in highly specialized sectors, Mr. Silani says that despite the crisis he doesn't lack customers. "The problem is that they keep delaying the payments – sometimes I have to wait 18 months."

This leaves businesses like his in a bind. "When your clients are so big and you're so small, you cannot raise your voice."

Silani says in the past years it has become a common practice among small entrepreneurs to turn to banks for loans when delayed payments are expected. Banks were once willing to offer credit to bridge the payment gaps, "but now they are increasingly reluctant to do so," he says.

"I'm really glad the government is pressuring banks to give more loans to small firms," Silani says. "But they should do more to guarantee we are in the position to have contracts respected."