Eurozone banks reported a “substantial” drop in loan demand from companies, prompting calls for the European Central Bank to signal it will cut interest rates soon when it meets this week.
The ECB said on Tuesday its quarterly survey of lenders showed “demand for loans from firms declined substantially, contrary to banks’ expectations of a recovery”. Economists said the fall in borrowing, which reflected lower investment plans, meant the region’s economy was likely to continue stagnating.
However, there were also signs of banks starting to stabilise the availability of credit to the economy in the first three months of this year, following a four-year tightening period, as they cut the cost of mortgages for the first time in more than two years.