Against this background, macroeconomic policies – above all monetary and fiscal policies – must remain complementary and the support they provide may be needed for a long time. The credit market provides a clear example. Our bank lending survey suggests that banks would tighten credit standards considerably if public loan guarantee schemes are not maintained.
Since there is evidence that these schemes have significantly suppressed the rate of corporate insolvencies, ending them prematurely at a time when even viable companies may face insurmountable financial barriers could lead to a sharp rise in corporate defaults and the associated adverse effects on banks. Similar problems would result, mutatis mutandis, from a premature tightening of financial conditions.