Europe is facing the danger of a lending squeeze following the recent banking turmoil, according to the continent’s largest pension-services provider.
(Bloomberg) — Europe is facing the danger of a lending squeeze following the recent banking turmoil, according to the continent’s largest pension-services provider.
“The risk of a credit crunch is there and it certainly increased” after the collapse of several US regional banks and the emergency takeover of Credit Suisse Group AG, said Thijs Knaap, chief economist at Netherlands-based APG Asset Management.
“I don’t think we’re there just yet, however it’s a very thin line,” Knaap said in an interview in Amsterdam. “If you do too much and you create a crisis, for example between banks, it could very easily turn into a funding crunch.”
The comments are markedly less optimistic than statements from some European Central Bank officials, who are hopeful that the 20-nation euro zone can emerge from the financial-sector turbulence with little damage and continue raising interest rates.
While mindful of any potential fallout, they remain focused on inflation, which is still more than three times the 2% target. Underlying price pressures excluding energy and food costs are a particular concern, setting yet another record last month.
“The biggest uncertainty at this point is that we know that inflation is too high and has to come down, while we’re not sure what the costs will be,” Knaap said. “Central banks will try to keep it as low as possible but it’s quite possible that it will be unpleasant.”
While confidence has been building that Europe’s economy can avoid a downturn, the threat of such an outcome remains.
“The risk is certainly there that you steer the economy into a recession,” Knaap said. “We don’t have a lot of headroom there.”
APG manages about €522 billion ($573 billion) in pension assets and has more than 3,000 employees in Amsterdam, Brussels, New York, Hong Kong, Beijing and Shanghai.
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