Lending in Germany: Where is the growth compared to the EU?

Lending in Germany: Where is the growth compared to the EU?

Not much is happening in Germany at the moment when it comes to lending. Despite all efforts, such as investment programs, growth in the credit sector remains well below expectations. In May 2025, the annual growth rate was just 1.9 percent - barely more than the inflation rate, as stated Barkow Consulting reported.

Corporate loans in particular are under pressure and are almost completely stagnating. While credit growth in the rest of the European Union has been performing better for over a year, Germany is clearly losing out here. The growth difference is currently around 1.5 percentage points in favor of the EU. This is a clear signal that the German economy is having a harder time than the rest of Europe.

Fluctuating lending

The development of corporate loans in Germany is reminiscent of a roller coaster ride. After a noticeable upward movement until October 2022, when credit growth reached almost 14 percent, there was a drastic decline from the fourth quarter onwards, which has now reached almost zero. The Bundesbank explains that this decline affects all banking groups and economic sectors. Companies are increasingly relying on internal financing, which is dampening demand for new loans.

At the same time, we are also seeing a recent increase in lending rates by banks as they respond to high inflation rates and the uncertain economic environment. This means that despite a certain revival in the credit market, banks are pulling the reins and acting more restrictively when it comes to lending. However, an outlook from the Bundesbank gives hope: a revival in credit growth is forecast for the second half of 2024 if the economic conditions stabilize. BaFin However, warns of a further deterioration of the situation due to increasing non-performing loans (NPL) and possible company insolvencies.

Economic challenges

The economic conditions are anything but rosy. In 2024, an economic decline of 0.2 percent was recorded and economic output in 2023 also fell by 0.3 percent. A slight improvement is expected for 2025, with growth of 0.4 percent. The problems are diverse: high energy costs particularly affect the chemical and processing industries, while geopolitical tensions and structural changes in trade place additional strain on export-dependent companies.

In addition, the low capital base of many banks represents an additional danger. A stress test showed that small and less important institutions in particular are at greater risk of loan defaults. In the fourth quarter of 2023, banks have already recorded increasing write-downs on commercial real estate loans - an indication of increasing credit risks.

The current situation represents a major test for the German economy. The next few months will have to show how banks' lending policies adapt to the changing economic conditions and whether the Bundesbank's forecasts of a gradual recovery can also be fulfilled.