According CreditSights the debt of European Companies is Dangerously High

The heavy debt volume carried by European companies reached levels that , for the experts of CreditSights, could be unsustainable if banks restrain credit still more.

According the figures monitored by this firm, the amount of debt carried by no financial European companies reaches the €6.400.000 million, what supposes an increase by 40% since middle 2004.

The analyst of CreditSights, David Watts, stated that “companies are nowadays with high debt levels” that, “with the credit from banks vanishing, can become unsustainable”.

Data apported by Watts shows that in this same period of time, the Gross Domestic Product (GDP) in the Eurozone grew by 14%, while the proportion between corporative debt and GDBT grew by 70%, from the 59%.

Banks are reducing credit, because loans to low rated companies are becoming more expensive. This situation could mean that “small companies wouldn’t be able to access the bond market and will find difficulties that could stuck the economic recovery” said the analyst.

This Way, Watts highlighted that “ to the next year, European companies could provably be divided in two groups: these who can obtain credit from financial markets and these which don’t”.

Last Week, The European Central Bank (ECB) kept the interest rate in the same levels again, that is in his lowest level in the history (1%), this should make debt cheaper for companies.

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