Europe’s main economic engine — small and medium-size businesses — desperately needs attention if the Continent’s nascent recovery is to gain momentum. To provide a boost, policy makers and the private sector must resolve the systemic problems that impede the flow of information, limit access to capital, and contribute to burdensome regulations that stifle growth and employment.

In France, for example, there are roughly 60 percent fewer companies with 50 employees than with 49 employees. Why? All things being equal, you would expect a normal distribution of companies by employee size, with no significant difference in the number of firms with 48 employees, 49 or 50. But, because of the regulations triggered by reaching 50 employees, a huge number of businesses deliberately do not exceed 49. Adding one more job involves coping with 34 more regulatory requirements — such as creation of a works council, a hygiene and security committee, and mandatory profit-sharing. That raises a company’s costs by the equivalent of 4 percent, on average, of total payroll.

Small and medium enterprises, or SMEs, provide two of every three jobs in Europe and account for 58 percent of business activity. They range from tiny startups to small family-run firms to medium-size concerns supplying major manufacturers. For Europe to fully recover, policy makers need to understand what is blocking financing to such enterprises, find solutions and quickly implement them.

Consider the size of the challenge: New bank lending to small and medium enterprises in the euro zone as a whole (using loans of less than €1 million as a gauge) has declined by 36 percent since the April 2008 peak. This falloff was steepest from 2008 to 2010, but the decline has continued since 2010. With a heavy dependence on domestic markets, these businesses have been coping with a sharp slide in demand from consumers, other firms and governments.