Small German firms feel big financial crisis impact

BERLIN (Reuters) - Small- and mid-sized German firms are suffering "massively" from the financial crisis, with their orders situation deteriorating and credit conditions tightening, the head of their BVMW business association said.

The fortunes of such companies -- collectively known as the Mittelstand -- are crucial to Germany's overall economic health as they account for some 70 percent of the workforce.

Mario Ohoven, president of the BVMW Mittelstand association, said the financial crisis meant small- and medium-sized German businesses were having to postpone investments.

"The international financial crisis is already hitting Mittelstand businesses massively," Ohoven told Reuters, adding that a BVMW survey showed credit conditions have deteriorated this year for every second Mittelstand business.

"More than 80 percent of small- and medium-sized businesses expect a further tightening in the coming six months," Ohoven said. "In addition, the orders situation at small- and medium-sized businesses is deteriorating."

Mittelstand companies -- mostly defined as those employing 500 people or fewer -- form the backbone of the German economy, Europe's largest.

"A survey of our members showed every fifth company is already having to postpone investments," Ohoven said.

"I fear an upcoming credit crunch," he added.

However, the head of the DSGV savings banks' association said corporate loan approvals at Sparkasse savings banks had risen by 13.5 percent in the first eight months of this year compared with the same period last year.

"There is not a credit crunch in Mittelstand financing," DSGV President Heinrich Haasis said.

(Additional reporting by Matthias Sobolewski; writing by Paul Carrel)