Tuesday, June 18, 2013
The subtleties of credit contraction
To get an idea of what a chore it is to retool an economy that had hitched itself on to a real estate boom, the chart on the left shows the percentage share of the 225 billion euro contraction in outstanding business debt attributable to various broad economic sectors, over the last three years.
Briefly, a little over 50 percent goes to the real estate services column - read 'promoters and the like' and 27 percent to the construction industry. Of the relatively paltry 47 billion that remains after removing those two, 22 get filed under industry (construction excluded). On the slightly affected side, we find agriculture and repairs & commerce. Unperturbed to any degree are the hospitality business, transport & communications and financial intermediaries.
You can't know without seeing a finer breakdown of the industry sector, but the above probably lends credibility to the notion that a large part of the dearth of new financing is the fault of a lack of viable proposals*. Or did all those construction and real estate guys magically acquire an entirely new set of skills since the game ended?
*We recall seeing that idiot Jordi Evole interviewing the owner of a business that manufactured portable toilets (mostly for construction sites, if it need be said) as he complained that the banks had suffocated a perfectly viable enterprise, for example.
Just in: The CEO of Caixabank, Isidro Fainé, today ever so tactfully made that point the he notes a 'certain contradiction' in governments' insistence that credit must begin to flow while simultaneously mandating more capital, liquidity and provisions for the banking industry.