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Credit conditions and corporate investment in Europe

Author(s): Laurent Maurin, Rozalia Pal and Philipp-Bastian Brutscher

Date published: Mar 2018

SUERF Policy Note, Issue No 28
Laurent Maurin, Rozalia Pal and Philipp-Bastian Brutscher
European Investment Bank (EIB)

Keywords: credit conditions, corporate investment, financing constraints, source of financing, access to finance, external financing, internal financing, SMEs, deleveraging, bank loans, equity financing, balance sheet adjustments, economic activity, financial costs, financial liability structure, corporate debt market.

This policy note analyses recent developments of corporate investments and financing conditions in the European Union (EU) with a view to understanding the pick-up in non-financial firm investment and in financial flows. In the current recovery, part of the EU economy is still following a deleveraging path, be it for firms or banks. This explains the specificity of the current overall modest rebound in investment and financial flows, supported by very accommodative monetary policies, an overall slightly supportive fiscal policy, and specific policies to target investment, such as the European Fund for Strategic Investments. Although access to finance is not a major concern overall, as financial costs are low and liquidity available, clear bottlenecks remain, particularly in some countries and for certain segments of firms. The European Investment Bank Investment Survey (EIBIS 2017) provides a picture at the micro level of firms of the impediments to investment arising from financial factors. Taking account of both, access to external finance and the tendency to be content to rely on internal financing capacity, some economies, mostly in the periphery and cohesion groups, still face challenging conditions. These are mostly linked to costs and the availability of collateral. In addition, some specific types of firms, such as young, innovative and/or small businesses, are confronted with a more adverse financial environment.

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SUERF Policy Note, Issue No 28SUERF Policy Note, Issue No 28

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