The European Commission said on Thursday it would create a 100 million euro ($141.1 million) micro-finance facility to provide credit to small businesses and encourage people who have lost jobs to start such enterprises.

The initial budget of the loan facility could leverage more than 500 million euros in joint ventures with other financial institutions such as the European Investment Bank, the executive arm of the 27-nation European Union said in a statement.

European small businesses and consumers have been hard hit by the worse recession since World War Two, which has made access to credit difficult and pushed unemployment rates to record levels as more workers are laid-off.

"The economic crisis will lead to 3.5 million job losses in the EU this year," EU Employment and Social Affairs Commissioner Vladimir Spidla said in the statement.

"The financial crisis has dried up credit to those wishing to start or develop their own businesses.

"In the current recession, we want to offer a new start to the unemployed through easier access to credit to set up or develop new businesses," he said.

Nearly 5.1 million people have joined jobless queues across the European Union in the 12 months from May 2008, data from the EU statistics office Eurostat said on Thursday.

The disadvantaged, including the young people who want to start or develop small businesses will benefit from guarantees, assistance, mentoring and training in preparing business plans, the Commission said.

It said the loans would be tailored to micro-enterprises employing fewer than 10 people, which would be eligible for loans up to 25,000 euros each. The plan could offer around 45,000 loans over a period of up to eight years.

The Commission said it expected the proposal to become operational by next year after it has been discussed and adopted by the EU ministers, the executive and European lawmakers.