Friday

12th Apr 2024

Bank survey highlights EU economic gloom

  • Demand for loans for homes and cars went down sharply, highlighting people's fears of lean times to come (Photo: Brett Jordan)

Euro-area banks are becoming less happy to lend and consumers are more reluctant to borrow, according to an authoritative new survey out Wednesday (1 February).

The European Central Bank (ECB) in Frankfurt in the past six weeks polled senior loan officers in 124 banks of various sizes across the 17-country single-currency zone.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The answers that came back showed a "surge" in the level of fear on both sides of the table in a mini-credit crunch that will make it harder for Europe to avoid recession in the coming year.

Germany was the "notable exception" in terms of willingness to lend on the bank side.

Meanwhile, Belgium, Finland, Italy, Malta, the Netherlands and Spain saw a particularly "strong deterioration" in terms of demand for mortgages from rank-and-file consumers.

The ECB noted that the biggest "net tightening" of bank credit last quarter came in the areas of loans for large corporations and for house mortgages - by 19 percent and 11 percent, respectively, compared to quarter three.

It said around half of all banks in all euro-using countries also reported "significant difficulties" in getting other banks to lend them money for day-to-day operations.

It blamed the trend on worries about exposure to bad sovereign debt, "weak expectations" of economic growth in 2012 and new EU rules requiring banks to keep more rainy-day capital in reserve.

The drop in consumer demand could be due to the fact banks are seeking more collateral and higher prices for mortgages, causing a vicious circle.

The ECB also noted consumers are borrowing less for other purposes, with lower household spending on "durable goods" such as washing machines or cars and "a decrease in consumer confidence" generally.

The gloomy results come after a recent shift in emphasis by EU leaders from austerity programmes to measures designed to revive growth and create jobs.

The EU growth measures look to long-term reforms - such as making it easier to hire-and-fire and cultivating a new digital market - rather than out-and-out financial stimulus programmes.

Despite the shift, leading forecasters, such as the International Monetary Fund in Washington, are saying that recession is all-but inevitable in 2012.

The fund's chief economist Olivier Blanchard last week said: "The world recovery, which was weak in the first place, is in danger of stalling ... But there is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession."

Banks queue up for cheap ECB loans

Over 500 European banks rushed to borrow almost half a trillion euro in cheap loans from the ECB on Wednesday, highlighting the credit squeeze on the market. The cash injection only marginally increased investor confidence, however.

Resist backlash on deforestation law, green groups tell EU

European environmental groups have urged the EU Commission to stand firm on implementing the bloc's landmark anti-deforestation legislation — despite a backlash from governments in South America, Africa and some EU ministers.

Opinion

This 'deregulation' lobbying now threatens EU economy

Next week's EU summit (17-18 April) will discuss the strategic agenda for the next five years. The current "competitiveness agenda" is to a large extent driven by a big lobbying campaign — so far, not well covered by the media.

Latest News

  1. UK-EU deal on Gibraltar only 'weeks away'
  2. Belgium declares war on MEPs who took Russian 'cash'
  3. Brussels Dispatches: Foreign interference in the spotlight
  4. Calling time on Amazon's monopolism and exploitation
  5. Resist backlash on deforestation law, green groups tell EU
  6. China's high-quality development brings opportunities to the world
  7. Ukraine tops aid list again, but EU spending slumps
  8. Who did Russia pay? MEPs urge spies to give names

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us