Euro area credit markets: step by step, little by little

The development of new lending to non-financial enterprises in the euro area shows that the credit channel is generally working. This is crucial to the effectiveness of the European Central Bank's monetary policy. However, new lending was subdued in the past quarters, especially in Spain and Italy. While special factors are at work in Spain – including large enterprises substituting loans with corporate bond issues – firms in Italy continue to face relatively high credit constraints. This is probably also due to the difficulties of Italian banks, which hold a relatively large amount of non-performing loans in their books. Resolving this problem appears to provide a major opportunity to revitalise the euro area's credit markets.

Euro area credit markets: step by step, little by little(PDF, 75 KB, non-accessible)