But in the midst of the worst recession in decades, microfinance has growing appeal even in powerful economies.

The commission is proposing microfinancing to provide people who have lost their jobs with small loans to start their own businesses and help existing companies expand. The proposal is spelled out in the action plan for jobs.

The loans would be tailored to businesses employing fewer than 10 people, which account for more than 90% of companies in the EU. They would be eligible for up to €25 000 each.

As a result of the financial crisis, credit has dried up and millions have lost their jobs. The EU economy is expected to shed at least 3.5m jobs this year.

"We want to offer a new start to the unemployed through easier access to credit to set up or develop new businesses," said employment commissioner Vladimír Špidla. "And we want to help small businesses to develop further despite the crisis."

About €100m in existing EU funds would be reallocated to the scheme. The initial budget could generate more than €500m with help from other financial institutions such as the European Investment Bank.

Young people who want to start or develop a small business will benefit from financial assistance, mentoring and training in drawing up business plans.

If approved by EU leaders and lawmakers, the microfinancing could be available as early as next year.