Buoyed by signs that EU banks are making progress in cutting the number of non-performing loans (NPLs) on their books, European Commission Vice-President responsible for the single currency, Valdis Dombrovskis, promised on Tuesday a new round of proposals aimed at reducing the amount of bad credit by no later than March.
“We emphasized that at the banking union level, we have to act simultaneously regarding risk sharing and risk reduction. An important part of risk reduction is to reduce NPL levels,” said Dombrovskis during an Economic and Financial Affairs Council (ECOFIN) press conference.
Dombrovskis told reporters that according to a report filed on Tuesday “The proportion of NPLs in the union has reduced by a third over the last three years.” The cut corresponds to around €300 billion, at a ratio of 2.6%.
“There has been encouraging progress in several countries with high levels of NPLs, including Italy, Spain, Portugal, Slovenia and others,” added Dombrovskis.
EU remains divided on NPLs remedy
Currently, around €1 trillion of NPLs should be slashed, but EU countries are divided over how quickly the cuts should be made. Germany and the ECB calling for faster reductions, but member states that made significant progress in reducing their NPLs in 2017 have chosen a more gradual pace to sustain more jobs in the banking sector.
“We have to continue at the same pace,” France’s Bruno Le Maire said, supporting Italy’s take on a gradual reduction of NPLs. Praising the efforts of the Italian government, Le Maire added that the process needs to continue at the same pace. “We have to continue our efforts as these are long-term projects. It will take time and require choices that are not always going to be easy,” said Le Maire after his arrival at the European Council.