The last ECB economic bulletin, published May 18, reported a collapse of credit to firms and households in the first quarter of 2023. “The decline in loan demand from firms was the strongest since the global financial crisis, while that of households was the largest since the start of the survey in 2003,” the bulletin says.
“The decline in loan demand from firms and households was stronger than expected by banks in the previous quarter. Banks reported that the general level of interest rates was the main driver of reduced loan demand, in an environment of monetary policy tightening. Falling financing needs for fixed investment also had a strong dampening effect on loan demand from firms. The decrease in the demand for housing loans remained strong and was mainly driven by rising interest rates, weakening housing market prospects and low consumer confidence.”
