EU must get credit flowing in struggling economies: EU's Rehn

Wed Oct 2, 2013 4:59am EDT
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MADRID (Reuters) - The European Union must do more to get credit flowing in Spain and other southern member states, EU Economic and Monetary Affairs Commissioner Olli Rehn said in an interview published on Wednesday.

Spain's economic prospects are improving "modestly", Rehn told Spanish newspaper Expansion, and that should lead to a gradual recuperation in credit, but this must be supported by policies.

"I am referring to the banking union, which will bring back confidence to the financial sector, possible decisions by the ECB and the European initiative with the EIB to boost loans to SMEs," he said.

"I kindly ask member states to take a strong and coherent position in favour of this initiative to unblock the worst bottleneck for economic growth, especially in southern Europe, where credit conditions are too strict for small and medium enterprises in Spain, Italy and other countries."

The European Central Bank concludes its monthly meeting on Wednesday, with investors looking for any new hints on whether it could offer new long-term unlimited loans to banks (LTROs) to keep banking liquidity ample and short-term interest rates low.

Debt held by Spanish companies dropped for the 29th straight month in August to the lowest level since March 2007, with the credit crunch hitting small businesses particularly hard, according to Bank of Spain figures.

He did not give any details on what the initiative would consist of.

Countries should be supported by the European Union's move towards banking union, as well as possible action from the European Central Bank (ECB) and the European Investment Bank (EIB).

Rehn reiterated that Spain may not need further aid for its financial sector after a 41 billion euro ($55.45 billion) bailout last year.   Continued...

Ollie Rehn, the European Commissioner for Economic and Monetary Affairs and the euro, looks at a screen after a Thomson Reuters Newsmaker event in New York, September 23, 2013. REUTERS/Chip East