Defaults set to rise in Europe

A year after losses on US subprime mortgages caused a seizure in credit markets worldwide, European companies are starting to default.

As many as 6 percent to 7 percent of corporate borrowers may fail to pay debts on time in the next year, a tenfold increase from June, according to Dresdner Kleinwort, a unit of Germany's third-biggest bank. That would be the highest since July 2003, according to data compiled by Moody's Investors Service, straining an already faltering economy.

"Companies that would have refinanced a year ago find now that they can't," said Andy Stoneman, managing partner at MCR Corporate Restructuring in London.