MILAN (Reuters) -- The European Union sought ways Saturday to marshal billions of euros into its sluggish economy without getting deeper into debt, casting the net wide to consider options from a pan-European capital market to a huge investment fund. Finance ministers from the bloc’s 28 countries are fleshing out a host of ideas circulating in European capitals. With interest rates already at record lows, ministers need radical steps to help growth at a time of near-record unemployment.

From Poland’s €700 billion ($907 billion) so-called European Fund for Investments to the European Central Bank’s plan to resurrect the EU’s market for asset-backed securities, Europe’s ability to get credit flowing to small companies is central to its economic revival.

“We’re thinking about instruments that facilitate investments,” Italy’s economy minister, Pier Carlo Padoan, said as he arrived for the gathering in Milan. “Resources [for investments] will come mostly from the private sector but of course public-sector resources will be instrumental in leveraging them,” he said.

The EU’s economy, which generates about one-quarter of global output, grew by just 0.1 percent last year, and its jobless rate is almost double that of the U.S., with about 25 million people unemployed.

Investment is the new buzzword among ministers, overriding the German mantra of budget cuts. Germany is under growing pressure from partners such as France and Italy to loosen the fiscal reins and use its overflowing government coffers to ramp up public investment. But German Finance Minister Wolfgang Schaeuble this week rebuffed calls for Berlin to spend more to boost the eurozone economy, which showed no growth in the second quarter as the recovery stalled.

In a speech in Milan, ECB President Mario Draghi described business investment as “one of the great casualties” of the financial crisis, saying it has fallen 20 percent since 2008. “We will not see a sustainable recovery unless this changes,” he told officials Thursday.

The incoming president of the European Commission, Jean-Claude Juncker, wants a €300 billion ($410 billion) investment program to revive the European economy.

Unlike their counterparts in the U.S., European companies rely on banks to provide 80 percent of loans, but banks are reluctant to lend following the worst crisis in a generation.

In Italy, Europe’s fourth-largest economy, credit to companies has shrunk by more than €70 billion since mid-2011 and is still contracting, central-bank data shows.

That problem is mirrored across Europe, holding back the recovery because smaller companies provide two of every three private-sector jobs in the EU.

Italian Organic Jam

Indebted countries such as France and Italy have little public money for businesses. Another hangover of the crisis is the differing cost of financing across the eurozone in a currency area that aimed to create the same financing conditions for all.

At their meeting, ministers have four ideas in front of them: an Italian paper on new financing tools for companies, a Franco-German proposal on how to boost private investments, a Polish proposal on creating a joint EU fund and the Juncker Commission’s call for the €300 billion program.

Poland wants a European Fund for Investments that would be able to finance, through leveraging its own capital, €700 billion worth of investment. The fund could be a special-purpose vehicle under the umbrella of the European Investment Bank, the EU bank owned by European governments. “The European Investment Bank isn’t short of money. There’s a shortage of projects -- and if we can match the money with good projects, we’ll get there,” said Luxembourg’s finance minister, Pierre Gramegna.

Italy’s proposal is a pan-European market, where smaller companies can raise capital, building on its so-called minibond legislation in 2012 that allows unlisted companies to issue. That could be part of a EU capital-market union, building on the eurozone’s banking union, but that would need to closely involve London, the leading financial center in Europe. Twenty-six Italian family businesses, including one that makes organic jam, issued bonds in the past two months, raising €1 billion ($1.3 billion) combined, according to the Italian treasury.

“This is not just about funding small companies per se, it is about funding high-growth companies,” said Nicolas Veron, an expert on capital markets at the Bruegel economic think tank in Brussels. “They start small, but the ones you are really interested in are the ones with the high growth potential.”

(Reporting by Robin Emmott, James Mackenzie, Gavin Jones, Francesca Landini, Martin Santa, Jan Strupczewski, Valentina Za; Writing by Robin Emmott; Editing by Rosalind Russell)