A French Credit Crunch

The French Association of Treasurers’ October reports that Corporate borrowing conditions have tightened materially.

There is evidence of both price and non-price tightening. Working capital is being shrunk; it’s harder to get credit than any time since mid 2008; and Bank margins are widening.

News like this is clearly bad, however there is a silver lining — it makes it more likely that the EU will find an ambitious solution this weekend.

The stakes are now very high. If a comprehensive solution is not found, it’s clear that there will be a severe credit crunch and a European recession. A recession would turn their presently difficult situation into a dire one.