Eurozone banks tighten firms' access to credit: ECB

Eurozone banks sharply tightened access to credit for businesses in the final quarter of 2024, the European Central Bank said Tuesday, strengthening the case for further interest rate cuts.

The period from October to December saw "the most pronounced net tightening since the third quarter of 2023," said the ECB in its quarterly bank lending survey.

It was due to "higher perceived risks" to the economic outlook, with banks in eurozone heavyweights Germany and France particularly cautious due to political turbulence.

Germany is heading for snap polls next month after its coalition government collapsed while a new government took office in France in December following the ouster of its predecessor.

Firms' access to credit is expected to be further restricted in the first three months of 2025, the ECB said.

Eurozone consumers' access to credit also tightened in the quarter, the central bank for the 20 countries that use the euro said.

The survey results will be closely watched by the ECB's governing council, and could reinforce the argument for lower borrowing costs to encourage banks to lend and consumers and businesses to seek loans.

After having hiked rates aggressively to tackle inflation, the ECB has been cutting borrowing costs and was already widely expected to make its fourth consecutive reduction at its meeting on Thursday.

Attention is shifting from the need to tame inflation towards boosting the eurozone's struggling economy.

At its last meeting in December, the ECB cut its eurozone growth estimate for 2024 to just 0.7 percent.

As well as higher rates, banks tightened their lending requirements last year because of new regulations that require them to hold more capital, according to the ECB.

The ECB surveyed 155 banks, with almost all responding.