There is no sign of a credit crunch in Germany but the risk of such a freeze in debt-strained euro zone countries and some places in eastern Europe is markedly higher, Bundesbank board member Andreas Dombret said in an interview published on Friday. Dombret told Handelsblatt business daily German banks were "somewhat reluctant" to grant new loans, "but in general there are no signs of a credit crunch and German banks' plans so far appear to give no reason to fear a reduction in credit".
However, he said the signs were more worrying in weaker parts of Europe. "In the euro periphery as well as Italy and Spain, the situation is clearly more strained. There and in eastern Europe there is much more pressure on the financial system and the risk of a credit crunch is clearly higher," he said.
His comments closely mirror those made by ECB President Mario Draghi on Thursday, who said that while lending data suggested there was no euro zone-wide credit drought, there was clear evidence it was drying up in parts of the bloc. Draghi added that the ECB's recent unprecedented injection into the banking system of almost half a trillion euros of three-year loans had helped avoid a more dramatic credit crunch.
"This (three-year ECB funding) certainly prevented what could have been a major funding constraint for our banking system with all the negative consequence that this could have been on the credit side." "We also saw interest rates declining, I would say, substantially, if not dramatically, all along the yield curve," Draghi said.