What a drag: The eurozone's credit burden

Credit is the grease that helps the economy function, but rising levels of nonperforming loans have burdened balance sheets, making it harder to encourage new lending and stifling economic growth.

High and rising levels of nonperforming loans in the euro area have burdened bank balance sheets and acted as a drag on bank profits. Banks, striving to maintain provisions to cover bad loans, have had fewer earnings to build-up their capital buffers.

This combination of weak profits and a decline in the quality of bank assets, resulting in tighter lending standards, has created challenging conditions when it comes to new lending.

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