While the markets are betting on a rate cut by the spring and Italian credit is struggling more and more, the bankers of the ECB have eyes only for the pay slips which have increased on average by 5% a year. The President of the Central Bank, Christine Lagarde, said it, and Isabel Schnabel, a German economist who has been a member of the Executive Committee of the European Central Bank since January 2020, repeated it, that an easing of rates could trigger a recovery in inflation. Alongside these hawkish words, the governor of Bank of Italy, Fabio Panetta, thinks that a more in-depth analysis of the data could alleviate concerns about nominal wage growth. Position which underlines the need for a rate cut, starting from this spring, if we want to avoid further disasters on the credit market and more generally on the national economy.
A year later… worse and worse
One company estimated that during 2023, bank loans to families and businesses collapsed by 40 billion euros, at a rate of 3 billion per month, and credit institutions' bad debts by more than 16%. The latter is a symptom of customers' difficulty in managing financial debt when rates are rising. Going into the details of the data, loans intended for companies went from 647.5 billion in December 2022 to 617.9 billion last December, with a decrease of 29.5 billion (-4.56%). Both short-term loans (up to 1 year in duration) decreased, from 145.4 billion to 141.4 billion, a decrease of 3.9 billion (-2.72%), as well as long-term loans (with maturities exceeding 5 years), which went from 347.1 billion to 321.5 billion, down by 25.5 billion (-7.37%).
On the family front, the situation is not improving. The most relevant variable is loans. These show a negative trend: -14.1 billion. The mortgage market is not doing well either, given that the stock went from 426.9 billion to 424.6 billion with a negative variation of 2.3 billion in 12 months (-0.54%). Consumer credit, however, is growing, albeit at a significantly slower pace than in previous years: the increase recorded was 6.2 billion (+5.44%).
A new balance
The ECB must deal with a new structure. We will never return to 2019 levels and on the one hand that's fine. We will most likely have to start dealing with more volatile inflation given that “on the one hand there will be downward pressure (the drop in energy costs) but on the other the huge investments for the energy transition and demographic dynamics will push prices upwards”, explains Carlo Benetti, Market Specialist of Gam (Italia) Sgr. The European economy is going through a negative phase of slowdown, yet for European stock markets it is possible that 2024 will be another positive year. “Volatility will probably remain high, the cumbia of boredom will continue to dance to the rhythm of the opposing tensions between rigorist central bankers and markets that are betting on the imminent easing of monetary policy,” concludes Benedetti.
