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Eu Considering Loan Guarantees To Boost Lending To Firms

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The European Union may guarantee the repayment of bank loans made to companies in an effort to improve firms' access to credit, especially in southern Europe, European Commission President Jose Manuel Barroso said on Wednesday.

Easier access to credit is critical to getting Europe's economy growing again, with even record-low interest rates failing to translate into an increase in lending.

The main challenge is to inject life into the six shrinking southern European economies -- Greece, Cyprus, Italy, Portugal, Spain and Slovenia -- since they will never be able to pay back their large debts without growth.

Barroso said three types of 'instrument' were under consideration to stimulate lending, with efforts focused on loans to small and medium-sized companies (SMEs) that make up more than 95 percent of all firms in Europe.

All three would involve pooling resources from a variety of EU lending facilities to provide the guarantees, he said.

"In every case the provision of public support will be conditioned on the benefits being passed through to SMEs in the form of increased lending," Barroso said.

Currently, a company based in southern Europe has to pay two to three times more interest on a standard loan than a northern competitor, European Central Bank data has shown.

So now the European taxpayer gets to take on all the risk.... What could possible go wrong with this idea. Being cynical about this I fully expect in a few years time massive bank frauds will have taken place with the European taxpayer footing the bill as guarantor.

If Southern companies are being charged more surely that's the market indicating there is a bigger risk of default and the EU want to distort the price mechanism?

Good to see that growth is the key to paying back all the debt...

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How dare the EU interfere with the proper functioning of the banking system?

How lucky we are that our own Government has a plan to stiff savers, give the banks cheap money under the FFL scheme and then allow lending to drop and the interest rates charged to rise. We don't need economic growth, we need profitable banks and bigger bonuses.

I sincerely hope we get a vote to leave this dog and pony show before they try to impose something similar on the UK.


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yes this is it. this is the solution we have been looking for.

what spain, greece, portugal need is easier access to credit.

when interest rates are high due to high risks, what you need to do is pretend its not risky and put the loan through anyway.

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  • 242 Brexit, House prices and Summer 2020

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