Why are euro area loans to non-financial corporations growing so slowly?

Abstract

In spite of an accommodative monetary policy and a general economic recovery, growth of loans to non-financial corporations has remained weak in the euro area. The consistently poor growth is largely due to extensive real estate market bubbles in a few countries, which then burst as a result of the financial crisis. The amount of non-performing loans on the balance sheets of banks significantly weakens banks’ ability to offer new loans.