European firms are facing a $1.5 trillion funding shortfall

COMPANIES in Western Europe face a funding shortfall of $1.5 trillion (&pound;900bn) next year &ndash; but European economies have put the worst of the recession behind them, according Standard &amp; Poor&rsquo;s.<br /><br />High unemployment and massive cuts in capital spending will squeeze growth with the car industry facing the toughest challenge, the credit rating agency warned in its outlook for next year.<br /><br />Capital investment could plunge as much as 50 per cent as Government capital dries up. Up to 75 companies large enough to be rated face default in 2010, S&amp;P&rsquo;s data shows.<br /><br />Blaise Ganguin, S&amp;P&rsquo;s European Chief Credit Officer said: &ldquo;Tight lending standards will persist as banks face increasing capital requirements and still have a long way ahead to clean their books.&rdquo;<br /><br />He added: &ldquo;2009 was torture for many European companies and the screws will be loosened only partially in 2010. While the worst of the recession may be behind us and default rates may have peaked, the recovery is likely to be extremely shallow.&rdquo;<br /><br />Meanwhile, banks could still face a worsening in their loan books next year as the jobless total rises and companies are still slashing costs. The tough lending rules will mostly hit small and medium-sized firms.