ECB staff say geopolitical uncertainty reduced loan demand from euro-area
exporters to the US and tightened credit conditions. Economists led by Petra
Köhler-Ulbrich says European automakers — among the firms most exposed to tariffs
— faced tighter lending standards, compounding existing structural problems.
Some banks left formal lending terms unchanged but stepped up monitoring of
affected firms. The staff estimate the impact on credit peaked April–October
2025 and eased later that year after a summer preliminary US–EU trade framework
improved sentiment and reduced policy uncertainty. The note did not reference
recent US–Iran tensions but warned such shocks could complicate recovery.
Policymakers are weighing that downside risk against inflation ahead of next
week’s rate decision.
