Also noteworthy is the fact that moratoria are more common in banks with higher credit growth in the years immediately preceding the outbreak of the pandemic. Looking ahead, the trend in employment and its distribution among households will be crucial in the coming quarters, as regards the materialisation of the financial stability risks posed by this sector. The ultimate impact will also depend on the effectiveness and continuity of the measures in place to sustain household income. 4  See Banco de España (Spring 2020), Financial Stability Report, Box 1.2, “Build-up of household debt defaults”. See P. Alvargonzález, M. Pidkuyko and E. Villanueva (2020), “The financial position of the workers most affected by the pandemic: an analysis drawing on the Spanish Survey of Household Finances”, Analytical Article, Economic Bulletin, Banco de España, 3/2020. 5  7  The real estate market Allow me now to briefly describe the recent developments in the housing market against the backdrop of the crisis triggered by the pandemic. After the very significant downscaling of housing investment following the crisis that began in 2008, which reduced its weight relative to GDP from 12% before the global financial crisis to levels close to 5% in 2019, in line with other European countries, this sector’s starting point was unquestionably less vulnerable. Moreover, the reduction in housing investment activity came about in parallel with a decline in house prices which, despite the growth observed in recent years, at end-2019 remained (in real terms) some 29% below the average nationwide levels observed in 2007.
They can also resort to undrawn amounts on their credit lines with financial institutions, to new borrowing, such as new bank loans and debt issuances, to divestments, or to new capital contributions from their members. This list of sources of liquidity for firms highlights the important role of economic policy measures in alleviating the effects of the crisis on the business sector. At the European level, the powerful monetary policy response from the European Central Bank (ECB) has proved essential for facilitating the financing of all European firms against this backdrop of high uncertainty, heading off financial fragmentation problems like those experienced as a result of the last crisis. Besides the approval of a new, very large asset purchase programme, this response has included the provision of liquidity to financial institutions under very favourable conditions providing they meet certain business lending targets. In Spain, the public guarantee programmes for loans to firms, which are managed by the Official Credit Institute (ICO)2 and have reduced the risk taken on by banks when lending in such uncertain circumstances, have been crucial, as have the measures to allow for more flexibility in temporary layoffs and short-time work arrangements (ERTE by their Spanish abbreviation) and the payment deferrals on certain tax obligations, among other measures. 2  ICO COVID-19 Guarantee Facility, approved through Royal Decree-Law 8/2020 of 17 March 2020.