Far from improving, household and corporate credit are suffering through tough times. According to recent data published by the Bank of Spain, overall household debt is around 885,428 billion euros and has dropped for six months in a row. For the first time in history, it has declined more than 1% within a year.
Corporate loans are not faring much better. If in January their balance sheets showed an annual drop of 1%, in May they showed 0.3% drop after several months of slowed growth. A drop this larges had not occurred since August of last year.
Sluggish credit is explained by the fact that families and companies are working hard to deleverage themselves and that financial firms are struggling to get funds in the market due to large capital demands and shrinking interest rate margins. This context makes it difficult for the banks to readjust and leverage loans.
With respect to households, loans associated with cost of living have backed down by 0.3% compared to May of 2010. Total household debt is about 674,927 billion euros.
Translated and Edited in English by Brandon Dyches and Jose L. De Haro