According to the European Central Bank (ECB), businesses across Europe are facing an ongoing cash crisis after an ECB study revealed that access to credit is hindering the economic recovery, however banks will begin to ease credit standards for homebuyers this year.

The report warned that Europe could be hit harder than the US if the liquidity problems are not resolved.

Gertrude Tumpel-Gugerell, ECB’s executive board member, said: "Credit supply is very important for the recovery but it is not yet there."

The study suggested that there will be some easing of credit standards in the mortgage market as banks’ access to wholesale funding eased in Q4 2009, however, due to them being unable to transfer credit risk off their balance sheets, there is a gloomier picture on consumer credit and loans to businesses.

There was an increase in demand for housing loans for the third quarter in a row, mostly explained by the contribution of improving housing market prospects, the majority of banks reported.