According to the ECB’s latest survey, net demand for loans among euro area firms fell sharply in the second quarter, falling to the lowest level since the start of the survey in 2003. It added that banks expect a further drop in loan demand in the third quarter, but at least on a “much smaller” scale. You can find the full report here.
It is evident that tighter financial conditions are weighing down here and further rate hikes by the ECB will not help this problem. A credit crunch is starting to emerge in Europe, which could mean increased risks of a sharp downturn later in the year.