The annual growth rate of loans to the private sector has remained well in negative territory; and the pace of contraction has actually accelerated over recent period. Certainly, weak loan dynamics can largely be explained by the current stage of the business cycle but we have to be attentive to alleviate structural and supply-side factor that may hamper credit provision.
The significant improvement in the funding situation of banks since the summer of 2012 has partly offset supply-side restrictions. But it will be some time before the more permissive funding conditions faced by many banks will be turned into an active spur for credit creation. The strategy of euro area policy-makers Against this background, how should policy-makers respond to the still fragile macroeconomic recovery?