In a report on fixed income, David Owen, Chief European Financial Economist at Jefferies, notes that demand for credit in Europe has plunged.
Owen asks Is it the supply or demand for credit that matters?
25 April 2012Europe Faces Japan Syndrome
Perhaps the most memorable comment Mario Draghi made to the European Parliament today was the need for a euro area Growth Pact, but he did draw comfort from the results of the ECB’s latest Bank Lending survey.
Draghi made reference to the fact that the balance of firms tightening credit conditions had fallen (from 35% in January to 9%). However, that it is not to say that credit conditions are actually easing, just that they are no longer tightening at the same rate as in January.
Not only are credit conditions still tightening, albeit at a slower rate, but importantly the ECB’s latest Bank Lending survey shows credit demand collapsing. This is not something that Mario Draghi mentioned to the European Parliament at all.
In reference to the above chart, Ambrose Evans-Pritchard at The Telegraph
says Europe faces Japan syndrome as credit demand implodes