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Financing the Real Economy

Canton, E. (2014) “Financing the Real Economy“, ECFIN Economic Brief, Issue 30, Φεβρουάριος 2014.

 

Introduction

In the aftermath of the economic and financial crisis, policymaking became more geared towards structural reforms to support the process of economic recovery, steered at the EU level through the reinforced economic govern-ance. While there areencouraging signs that an economic recovery is underway in Europe, growth pro-spects are modest and further re-forms remain necessary in order to restore productivity and reach the Europe 2020 targets. Priorities for the EU include, inter alia, re-storing normal lending to the economy and promoting growth and competitiveness for today and tomorrow.

This article addresses the relation-ship between the real economy and the financial sector, asking the question: to what extent does the crisis in the financial sector cast a shadow on economic activity?

The purpose here is to explore how bank lending can affect the real economy, and how distress in financial institutions has influenced bank lending to firms. To better understand this complex issue, a multifaceted approach is adopted, and the relationship is examined from a firm-, sector-, and macro-level perspective. This Economic Brief presents the main findings.

 

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