Growth in business loans in the large euro-zone countries: A key factor in these countries’ economic equilibrium

In the recent period, business loans have been growing rapidly in France and Germany and declining drastically in Spain and Italy, which is consistent with banks’ situation in these countries. This development is crucial in understanding these countries’ economic equilibrium. In Germany and France, corporate investmen ts are self-financed; credit growth is therefore not used to finance investments but to increase cash reserves and for acquisitions. In a world of very low interest rates, this shows that debt leverage can be used for purposes other than financing investment; In Spain, profitability, the self-financing rate and the level of corporate investment are very high; the decline in business loans therefore reflects the fact that companies have no need to borrow thanks to the high level of earnings , which is obtained by squeezing wages; in Italy, companies’ profitability and investment level are low, investments are completely self-financed; the decline in business loans has therefore forced Italian companies to reduce their investments.