25th Mar 2023

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

Become an expert on Europe

Get 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.

'Final warning' to act on climate change, warns IPCC

The United Nations's report — synthesising years of climate, biodiversity, and nature research — paints a picture of the effects of global warming on the natural world, concluding there is "no time for inaction and delays."


EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. EU's new critical raw materials act could be a recipe for conflict
  2. Okay, alright, AI might be useful after all
  3. Von der Leyen pledges to help return Ukrainian children
  4. EU leaders agree 1m artillery shells for Ukraine
  5. Polish abortion rights activist vows to appeal case
  6. How German business interests have shaped EU climate agenda
  7. The EU-Turkey migration deal is dead on arrival at this summit
  8. Sweden worried by EU visa-free deal with Venezuela

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  2. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  3. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  4. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality
  5. Promote UkraineInvitation to the National Demonstration in solidarity with Ukraine on 25.02.2023
  6. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting

Join EUobserver

Support quality EU news

Join us