This surprised the ECB (and not for the better): European banks limit their lending to companies that nevertheless want to borrow (and especially in Germany).

Euro zone banks unexpectedly tightened their corporate credit standards in the third quarter, due to rising risks to the economic outlook, the European Central Bank said on Tuesday (Oct 28), ahead of a meeting on Thursday to make a decision on rates. German banks, in particular, tightened credit when institutions in other major countries, including France, held it steady.

The ECB analyzes how loans to businesses and individuals flow through the economy to see if its interest rate policy is working well. “In general, the transmission of monetary policy is proceeding smoothly,” said Philipe Lane, chief economist of the ECB, in mid-October, after the Frankfurt institution reduced its rates eight times between June 2024 and June 2025. Since then it has kept them unchanged, at 2% for the main interest rate on deposits, and this monetary status quo should continue on Thursday, the day of its next meeting. according to observers.

Stagnation of the economy

However, it could increase pressure on the institution to further ease its monetary policy, while economists expect almost zero growth in the euro zone in the third quarter, according to data expected on Thursday. At issue are US customs tariffs and political uncertainty in France that is suffocating demand, while in Germany, the massive investment plan of Friedrich Merz’s government should not take effect until 2026.

The ECB study also shows that demand for business loans “increased slightly” in the third quarter, supported by falling interest rates, but that it “remained generally weak.” Demand for credit increased in Germany, Italy and Spain, while it decreased significantly in France. According to the ECB, banks forecast stable criteria and demand for corporate loans for the fourth quarter.