"So
the idea must be that the presence of the ECB in the SME ABS market would spur
loan issuance. To make a significant difference to credit conditions in the
periphery and repair the broken monetary policy transmission mechanism, that
loan issuance would have to be simply huge and concentrated in periphery
countries. There are several problems with this, to my mind.
Firstly,it
makes a huge assumption about the scale of potential demand for credit in the
periphery from creditworthy SMEs. Is discouraged demand really that huge - or
is there actually a problem with the creditworthiness of potential borrowers,
because of the widespread destruction of physical and human capital in the
periphery? Distressed corporate loans in the periphery are far higher than in the core. That's
why spreads are so high. Why would an SME ABS programme
improve the creditworthiness of borrowers?"
