Divyang Shah, Senior IFR Strategist
We have seen much talking about the need to improve credit availability for SMEs as a means of improving the growth and jobs outlook in the eurozone.
But we have yet to hear of a satisfactory solution with some movement via the EIB or KfW for individual countries.
Finnish PM Jyrki Katainen and Portuguese PM Pedro Passos Coelho are both writing in the WSJ today to jointly call for action for SMEs. This is not about stimulus but a desire to get monetary stimulus to flow to the right places.
We continue to like the idea of limited guarantees from the EIB for SME loans to which the ECB would provide a longer term (3-5 years) LTRO to banks who bundle up these loans and take them to the ECB as collateral.
The guarantees would allow for smaller haircuts on the ABS, while longer term financing would provide banks with an incentive, especially if they were to occur at a fixed rate (as opposed to being linked to the MRO rate).
