Eurozone crisis drying up credit to households

Bank lending to private households in the euro area contracted again in January as the region’s long-running debt crisis continues to choke demand for credit, data showed on Wednesday.

By (AFP)

Published: Wed 27 Feb 2013, 5:08 PM

Last updated: Fri 3 Apr 2015, 4:58 AM

Eurozone bank loans to the private sector declined by 0.9 percent in January compared with the same month in 2012 after already shrinking by 0.7 percent the previous month, the European Central Bank said in a statement.

The ECB has long argued that falling loans to the private sector reflects weak demand for credit rather than tight lending conditions, given the pessimistic view of eurozone growth prospects and heightened risk aversion amid the crisis.

The ECB also published eurozone money supply data, which suggest that growth in the money supply — a key guide to future inflation — picked up last month.

Growth in the M3 indicator, which measures the amount of money in circulation, grew by 3.5 percent in January, compared with 3.4 percent in December.

The ECB regards the M3 figure as a key guide to inflation pressures and uses it to set interest rates accordingly.

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