Certainly firms’ demand for credit has declined, given the poor state of the economy, but surveys of banks and firms indicate a tightening of credit supply terms as well.
The Italian banks participating in the Eurosystem’s quarterly Bank Lending Survey confirm that the rise in lending rates and the strains on credit supply are due mainly to serious difficulties in raising funds in the markets as well as to growing credit risk. Firms are now facing the second tightening of lending terms within just a few years.