Image Source: Pixabay
 

Steady bank lending growth in the Eurozone is in line with our view of modest GDP growth over the winter. While investment growth disappointed in 2025, stronger public spending is set to boost the investment outlook for the quarters ahead.

Just like inflation developments, monetary developments in the eurozone remain quite stable for the moment. The neutral stance from the ECB seems to be compatible with the modest growth in Eurozone bank lending. Year-on-year growth in lending to households and non-financial corporates currently stands at 2.9% and 3.1% respectively, both slightly higher than in October.

Loan growth to households has been on a steady upward trend in recent months, while loan growth to corporates remains volatile. Historically, this is comparable to the levels seen in 2017, which was a period of decent investment growth for the bloc. Yet today, Eurozone investment growth is a lot slower.

While investment currently disappoints and bank lending growth doesn’t indicate much of a change in pace for the time being, it could be in for a turn. Normally, bank lending growth is a leading indicator for investment, but with a lot of public money flowing into Eurozone investments in 2026 – think of extra defence spending and the final sprint in NextGen EU projects in many (more southern) eurozone countries – the coming quarters could well see a turn where investments start to outpace expectations based solely on the credit cycle.

More By This Author: