The Eurozone’s SME bank-financing gap has considerably reduced since 2015, when the ECB began its quantitative easing program. The gap measures the difference between demand and supply of credit for SMEs, meaning it captures the unaddressed demand for credit. It is expected to have decreased from 6% of GDP in 2015 to 3% of GDP in 2019 (or EUR400bn) therefore moving closer to but remaining higher than the 2% of GDP seen in the US, where corporate financing is much more diversified between bank credit and market financing.
However, country heterogeneity persists. SME bank financing gaps are the highest in the Netherlands (22% of GDP), Belgium (14%) and France (9%) where growth in corporate debt has outpaced activity. In Belgium and France, the gaps have even widened between 2015 and 2019, and SMEs tend to have much higher debt ratios compared to three years ago. Meanwhile, SMEs in Southern Europe have strongly adjusted their loan demand downwards, mainly as credit supply did not follow.