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Improvements In The Euro Area Credit Conditions Should Not Be Ignored

While there is almost no coverage of this topic in the financial media and the blogosphere, credit conditions in the Eurozone are showing marked improvements. This is an unpopular view these days, but ignoring the trend results in an incomplete view of the area's economy and markets. Here are the key indicators:

1. Credit supply/demand fundamentals are trending in the positive direction. Loan demand has improved dramatically and credit standards are looser than at any time since the Great Recession.

This shows indicators for corporate loans and residential mortgages (source: ECB)

2. Since the conclusion of ECB's stress tests in early 2014 (which had been a major source of uncertainty for banks in 2013), loan balances in the Eurozone are beginning to stabilize. Corporate loans are still declining (as maturing loans are not being fully replaced by new loans) but at a much slower rate. These improvements are of course… Read More …