The question is recurrent but arises more acutely in this period of economic uncertainty. The financial crisis we are going through has few precedents and we are far from over.
The States, many local authorities (regions, departments and municipalities), as well as certain administrations are indebted, sometimes stuck in the toxic loans offered by Dexia .
In addition, growth is sorely lacking to allow leaders to find solutions that give quick results.
A steady decline for a year
In this context, the drop in credit recorded in recent months sounds like a call to the European Central Bank to act. This has often intervened to boost financing for businesses and individuals, confirming the importance of credit in boosting consumption and supporting the economy.
But this ECB publication is certainly not a surprise. Companies and in particular SMEs and SMIs and even more so VSEs have suffered from cash flow problems since the start of the crisis and we know that banks have significantly tightened their conditions for granting loans to individuals. We have also been able to observe in the field of real estate loans that network banks no longer wish to finance projects over periods of more than 25 years (compared to 30 previously). And the terms of credit do not end up falling . In addition, they require the borrower to have a personal contribution to finance the costs ancillary to the acquisition, which constitutes a brake for candidates for first-time buyers.
Let’s not forget that a few months ago the public authorities “urged” the banks to rebuild their equity . The latter no doubt have the will to reduce their commitments.
Home loans tumble in May
The recent statistics published by the Banque de France reproduce a press release from the ECB and provide details on the state of loans in May 2012. We looked at loans granted to households as well as those granted to non-financial corporations (thus excludes banks, insurance companies and pension funds).
Loans to households fell dramatically in May 2012 compared to the previous month, with only 2 billion euros granted (7 in March and April 2012).
Looking at the figures in more detail, however, we note that the fall mainly concerns housing loans (only 1 billion in May against 7 in April and 10 in March). Although it is too early to draw conclusions, these results are cause for concern.
Does the ECB still have the means to intervene?
Many personalities believe that the ECB must lower interest rates again , as it has been able to do in the past. But does it still have the means because monopolized by the repurchase of the public debts of Greece, Spain, Portugal or even Italy, can the European Central Bank support credit? The question obviously arises in view of the sums committed for the redemption of the bonds of these countries.
Deterioration of the economic situation
But it is not certain that intervention by the ECB will be sufficient to revive credit activity . The economic situation and the lot of uncertainties it brings to the life of households remain a brake on indebtedness. In addition, real estate prices have not made it possible to make the market more fluid, which is still difficult to access for young workers and low-income households.
Finally, the recent budget cuts of the last Finance Law with, in particular, the refocusing of zero-interest loans in new buildings and the announced end of the SCELLIER scheme have only worsened an increasingly compromised situation.