Euro Zone Firms Face Tighter Credit and Rising Costs

The European Central Bank reported Monday that firms in the Euro zone are experiencing increased difficulty obtaining bank credit while facing rising costs for fuel and inputs. According to the quarterly Survey on the Access to Finance of Enterprises, the share of firms reporting obstacles to obtaining bank loans rose to 7% in the three months ending in September, an increase from 5% in the previous quarter.

The central bank noted that firms are seeing a simultaneous increase in the need for trade credit and credit lines due to working capital pressures. However, banks have become more cautious in extending this financing, which may constrain the ability of firms to meet short-term funding needs. Along with credit tightening, firms reported rising expectations for wages, prices, and other operational costs.

The European Central Bank is expected to maintain current interest rates this week. This pause allows the bank to further evaluate the impact of borrowing costs on the economy as it continues efforts to curb inflation driven by energy prices.