Carter Dougherty reported from Frankfurt; Katrin Bennhold from Paris. Matthew Saltmarsh contributed reporting from Paris.

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Dominique Boudier, who runs a printing business outside Paris, received a letter from a key supplier a week ago that her credit line was being cut in half, effective immediately. When Boudier picked up the phone to find out why, she was told that the supplier's credit insurance company had ordered the clampdown.

On Monday, Boudier's main supplier followed suit, effectively paralyzing her business.

"We can't do our job and it has nothing to do with order books," Boudier said. "Clients pay on average with a 60-day delay. We just haven't got the cash-flow to pay our suppliers immediately."

Boudier has pleaded with her bank to make up for the sudden shortfall, to no avail. "We can survive this for a week, or a few weeks," she said, "but beyond that, nothing is certain."

The credit crunch that had been largely a U.S. phenomenon has arrived with gale force in Europe, transforming the economic outlook across the Atlantic in just the past few weeks.

While many individual businesses still maintain solid relations with their lenders, a new level of chaos in credit markets is crimping financing for numerous borrowers across Europe. So far, global interest rate cuts and cash infusions by central banks have provided scant relief.

"It's almost impossible to invest for the future in this environment," said Thomas Serval, chief executive of Baracoda, a company based outside Paris with 40 employees that develops Bluetooth devices. "I'm not sure how long it will last."

Europe as a whole may not be suffering from the housing market devastation of the United States, but the downward spiral of financial events since the bankruptcy filing of Lehman Brothers on Sept. 15 has eviscerated European business and consumer confidence. (Page 12)

Worries about the future are curbing household spending, countering any relief Europeans got from the sharp fall in oil prices from their July peak of $147.27 a barrel.

Business investment, which drives purchases of the high-value goods and services that are a European specialty, is ebbing fast amid the insecurity.

As a result, most economists and many business leaders now predict that a European recession is nearly certain this year, and may well continue into 2009.

"Predictability disappeared once the financial crisis accelerated dramatically during the last two weeks of September," said Henning Kagermann, co-chief executive of SAP, the bellwether German software giant.

SAP had to deliver the bad news Monday that its earnings for the third quarter would fall short of expectations.