Wednesday, October 28, 2009

Eurozone bank lending down in September! Why?

While most EUropean governments, including those 16 in the Eurozone of the EU, have spent quite a lot of money to try to help banks and boost lending to consumers, companies and home buyers-mortgage holders, data from the European Central Bank (ECB) shows that Bank loans to companies in Eurozone declined in September at an annual rate of 0.3% after a +0.1% annual rate in August!

The equivalent rates for loans to households was also negative, -0.3%, in September, after -0.2% in August.

Mortgage related lending in the Eurozone declined even more, -0.6%!

Now, why is this? Some seem to argue that these data are a result of lower demand for loans, as companies, households and mortgage holders are tiding up their "internal" finances. Hm!

As as as companies (in the Eurozone) are concerned, I am willing to "buy" this "theory", since Service and micro and small companies do not have as many capital needs as industry does/did.

But I am not sure, who can?

In any case, the news tend to re-enforce my theory that in this Services - post-industrial era for the US and the EU, economic modeling and policies have to account for the new reality: That the core of the economy are micro and small companies and Services, and that it is their "needs" that policy makers have to understand, first, and then address. And that a key need is better and less regulation, which now suffocates small firms.

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