“On the lending side, we see that the situation is still tight, especially in the periphery,” Draghi said after the meeting in Aylesbury, near London. Still, “the situation is in a sense getting less bad.”
Bank Lending
Authorities are keen to rally lending at banks, which account for about 80 percent of corporate financing in the euro area, compared with less than 20 percent in the U.S. Small companies in the periphery are especially starved of cash, hurting a traditional engine for hiring.
Europe’s ease in austerity measures could translate into a decline in the bloc’s so-called structural budget deficit by less than 1 percentage point of output, compared with a 3-point decline over the last two years, Credit Suisse Group AG said.
Highlighting the change in tone, French Finance Minister Pierre Moscovici said there needs to be a greater onus on improving the competitiveness of economies and delivering consolidation that’s credible and doesn’t destroy growth.
“I don’t like the word austerity,” Moscovici told Bloomberg Television’s Francine Lacqua after the G-7 meeting. “It means cutting over what is necessary.”
Moscovici said France is suffering “adjustment fatigue” as it teeters on the brink of its third recession in four years.
‘Enough Room’
Even Germany, Europe’s biggest economy and the lead advocate of budgetary rigor, has softened. Finance Minister Wolfgang Schaeuble said May 9 that Europe now has “enough room to maneuver” on fiscal policy.
“Nobody spoke about austerity policy,” he told reporters after the G-7. “Everybody agrees that we never conducted an exclusive austerity policy, but that we always carried out policies for sustainable growth, which of course have sustainable public finances as a precondition.”