Monetary Policy, Credit and Territorial Imbalances in Europe in Crisis Times

This paper analyzes the origins of the crisis in the Eurozone and the monetary policy adopted by the European Central Bank following the developments of sovereign debt crisis. It shows that fiscal consolidation policies implemented in all the countries affected by the sovereign debt crisis, aimed at restoring market confidence, in spite of a monetary policy that has become more and more expansive over the years, triggered a downward spiral which has further endangered the prospects of development in Europe. This has undermined the possibility of banks to expand their credit to the productive system and has increased territorial imbalances within the Eurozone in terms of availability, quality and interest rates. The empirical analysis here presented highlights the deterioration of the relationship between banks and firms in the Eurozone considering the divergent dynamics of two representative Countries such as Germany and Italy. In addition, the imbalances within Countries have become more marked, as highlighted by the Italian situation where the South is increasingly disadvantaged in relation to the availability, quality and cost of credit.