While economists point to slow demand as the main reason for weak loan growth, the day of reckoning is likely to come when the economy picks up speed and firms turn to banks for loans.
The second-quarter survey of eurozone banks will show the worst tightening of credit standards is over, ECB Governing Council member Christian Noyer said last week, suggesting that credit has "loosened considerably" and almost stabilised.
Some ECB policymakers have urged banks to lend on funds provided by the 16-country bloc's central bank, but have kept their criticism muted.
German Finance Minister Peer Steinbrück has floated the idea of the Bundesbank buying corporate bonds, only to see it shot down by the central bank, and German exporters have said getting loans is difficult and likely to get worse.
In comparison, ECB President Jean-Claude Trichet has gently reminded banks of their "responsibilities". Noyer, who also heads the French central bank, said: "Globally, distribution of credit is not restricted unduly."
But eurozone private sector loan growth rates continued to shrink in June, a development economists attributed largely to weak demand.
Weak banks
In Finland, a second-quarter bank lending survey published earlier this month showed that 85% of banks expected loans to firms to decline in the third quarter, with 68% saying they saw weaker demand.
From a business point of view, it is easy to see why banks may be reluctant to keep on lending. In the previous ECB quarterly lending survey, published in March, the banks said the main reasons for tighter lending standards were bleak economic forecasts, as well as industry- and firm-specific outlooks.
Firms applying for loans are now in worse shape than in recent years and some plan to use the money to stay afloat, rather than for making profitable investments or acquisitions.
Also, the export-dependent euro zone is unlikely to emerge first from the global recession, pushing more firms to the brink.
The expected stabilising in the second-quarter bank lending survey was likely due to the better economic outlook, Fortis economist Nick Kounis said.
"Tightening is done for the most part for cyclical reasons: banks are afraid clients will suffer more defaults," he said. "If there is a problem above that, there is not much the ECB can do."
(EurActiv with Reuters.)
