Research and Markets: Consumer Borrowing in Europe: Market Review 2004; Fizzers, Bubblers and Fizzlers: Europe's Countries Fall into Three Blocks for Credit.DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com) has announced the addition of Consumer Borrowing in Europe: Market Review 2004 to their offering. This report provides an analysis of Consumer Borrowing in Europe. Information provided includes: - Executive Summary - Introduction - Strategic Overview - The UK - France - Germany - Belgium and the Netherlands - Scandinavia - Italy - Spain - Southern Europe Southern Europe or sometimes Mediterranean Europe is a region of the European continent. There is no clear definition of the term which can vary depending on whether geographic, cultural, linguistic or historical factors are taken into account. - Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. - Consumer Dynamics - The Future Europe's countries fall into three blocks for credit: fizzers, bubblers and fizzlers. Fizzers include Estonia, Latvia, Hungary, the Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. and Greece. Bubblers comprise an arc of nations with credit markets, stretching from Finland, southwest to Portugal and then eastwards east·ward adv. & adj. Toward, to, or in the east. n. An eastward direction, point, or region. east to Cyprus. Fizzlers, with the slowest growth, are in the Eurozone Eurozone Noun same as Euroland Eurozone n → eurozona, zona euro Eurozone n → zona euro heartland in and around Germany. Consumer credit as a percentage of gross domestic product (GDP GDP (guanosine diphosphate): see guanine. ) is high in the UK and low in Finland. Total lending (including mortgages and consumer credit) as a percentage of disposable income disposable income Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also is higher in the Netherlands than in the UK, despite the UK's reputation for profligate prof·li·gate adj. 1. Given over to dissipation; dissolute. 2. Recklessly wasteful; wildly extravagant. n. A profligate person; a wastrel. borrowing. Looking specifically at consumer credit in relation to household income, the UK is the most indebted European nation. Greece's credit market is the most dynamic among the Eurozone countries, but has been growing too fast for comfort. Credit markets are also growing rapidly in Eastern Europe. Companies working to become pan-European lenders include BNP Paribas BNP Paribas (Euronext: BNP, TYO: 8665 ) is one of the main banks in Europe and France. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. , Credit Agricole and Santander Central Hispano. Provident Financial Provident Financial plc is a financial services group based in Bradford, England. It specialises in home credit, but also owns Vanquis Bank which offers credit cards. Domestic Operations focuses on countries with a preponderance of low-income households and unsophisticated consumer credit sectors. Interest rate caps apply in several European countries and give borrowers helpful protection. THE UK -- PROPERTY BOOM FIRES BORROWING BONANZA The UK's economic situation is relatively robust. This is just as well, because UK households and housing associations owed GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 936.69bn as at 31st December 2003. The amount outstanding rose by 0.7% just in December 2003. Rising debt levels among the under-25s are a significant worry for the future. Much borrowing is for property improvement and buy-to-let, for financially assisting children and other relatives, and for new loans to refinance debts. FRANCE -- TOUGH MARKET The French credit market is growing slowly. Strength in mortgage lending has reduced the capacity of mortgage holders to take on new consumer credit. Interest rate caps and privacy safeguards favour borrowers rather than lenders. GERMANY -- HARSH WELFARE CUTBACKS Severe cutbacks in social welfare provision and reductions in job security are hitting German households hard. Households are tending to borrow to try to maintain their standard of living. Mortgages have been boosted by a grant to homebuyers -- the Eigenheimzulage -- but this is being drastically reduced and potential homebuyers fear it may end completely. Privacy restrictions make accurate credit risk assessment difficult. There are large numbers of non-performing loans, which commercial banks are selling off. BELGIUM AND THE NETHERLANDS -- LIMITED SCOPE FOR GROWTH Consumer protection and credit regulation is extremely strict in Belgium -- users of revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. have to clear their debt at specific intervals. The market is not sufficiently attractive to inspire strong competition between financial-services groups. In the Netherlands, many borrowers are struggling to meet repayment obligations, despite statutory limits on interest rates. Households' mortgage debts are more than twice their savings deposits Savings deposits Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand. . SCANDINAVIAN COUNTRIES -- LITTLE NEED TO SAVE, LITTLE REASON NOT TO BORROW The long-established welfare states and the political stability of the Scandinavian countries encourage consumer confidence, including the confidence to borrow. Consumer borrowing has been rising significantly in Sweden and Finland. Lending is stable overall in Denmark, disguising a shift towards revolving credit and away from fixed-term loans. Bonds fund mortgage lending in Denmark, a practice that is spreading across Europe. ITALY -- CREDIT GROWTH DESPITE USURY LAW usury law A state law that restricts the interest rate that can be charged on specified types of loans. Italy's consumer lending Consumer lending or consumer loans refers to any type of loan product that is not a mortgage; such as a car, boat, manufactured home, home equity loan, home equity line of credit, signature loan, signature line of credit, recreational vehicle, or Certificate of Deposit loans. market is the least developed of the large EU economies. There is an interest rate cap imposed by the law against usury usury: see interest. usury In law, the crime of charging an unlawfully high rate of interest. In Old English law, the taking of any compensation whatsoever was termed usury. , but consumers are finding plenty of credit despite this. SPAIN -- HOUSEHOLDS STRUGGLE One household in 12 in Spain spends over half its income on debt repayments. Lenders are worried about the debt burden carried by these households. On the other hand, almost half of Spanish households reports being debt free and so form a potential market for new credit. Mortgage lending is strong. This is partly due to demand from North Europeans for homes in the sun, making property worryingly expensive for the home population. SOUTHERN EUROPE -- CONTRASTS IN PORTUGAL AND GREECE Consumer credit is surging in Greece, where borrowers benefit from controls over interest rates. Conversely, Portugal's consumers are cautious about taking on new debt. Mortgage lending is inflated by demand for property from North European buyers. A subsidised mortgage scheme, which used to help low-income buyers, has been scrapped, making life tougher for young homebuyers. EASTERN EUROPE -- THIRST FOR CREDIT There is a lack of accurate data in this region on which to base credit risk assessment and accounting standards are also an issue. These factors contribute to the worrying levels of repayment arrears and defaults. Bad debts are a problem for the rapidly expanding home-collected credit sector. Provident Financial, the leader in home credit in Eastern Europe, is one of the few UK companies to develop large-scale financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. in the region. The consumer credit market in the East European countries joining the EU in 2004 would be adversely affected by the European Commission's proposals to harmonise -- and strengthen -- consumer credit regulations to help prevent borrowers from incurring debts they cannot afford to repay. THE FUTURE The EU's proposed Consumer Credit Directive has problematic aspects for lenders and borrowers. As drafted, it would have made revolving credit harder and more costly to obtain. However, in September 2003 the European Parliament European Parliament, a branch of the governing body of the European Union (EU). It convenes on a monthly basis in Strasbourg, France; most meetings of the separate parliamentary committees are held in Brussels, Belgium, and its Secretariat is located in Luxembourg. insisted that the Directive was rewritten to have a softer impact on low-income borrowers. Countries with interest rate caps protect consumers but make business less attractive for lenders if market interest rates soar. Any rise in interest rates, especially in countries without caps, would increase bad-debt levels, which are already worryingly high in Eastern Europe. Huge bad debts in South Korea are a warning to lenders in Europe and a sign for credit providers to be cautious as they enter the massive Chinese market. Points to watch include: - Insecure economic development in Eastern Europe, where defaults need to be managed extremely carefully if the region is to live up to its considerable potential as a new market for credit. - Over dependence on tourism around the Mediterranean. A reversal in tourism income in Greece would slow the booming credit market there. - Pressures on incomes in the core Eurozone countries, notably Germany, France, the Benelux countries and Austria, as governments reduce welfare state provisions. Many consumers will have smaller disposable incomes from which to repay their debts. - Although UK consumers are over indebted, short- and medium-term economic prospects in the UK are brighter than those in most of Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). For more information visit http://www.researchandmarkets.com/reports/c4406 |
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