Eurozone crisis weighs on lending to households

Eurozone crisis weighs on lending to households

FRANKFURT - Agence France-Presse
Bank lending to private households in the euro area, which had practically dried up in recent months, remains very subdued in face of the region’s crippling debt crisis, new data showed yesterday.

The European Central Bank, in its regular monthly money supply data, calculated that growth in eurozone bank loans to the private sector barely increased at all last month, rising a fractional 0.1 percent in July after contracting by 0.2 percent in June.

And with no end to the crisis in sight, credit to the private sector is likely to remain very weak for the foreseeable future, analysts said.

“We expect to see further weakness in credit to the private sector in the coming months, mainly explained by very weak demand conditions and economic prospects,” said UniCredit economist Loredana Federico.
Commerzbank economist Michael Schubert believed the ECB could use low loan momentum as an argument for restarting its contested bond-buying program.

“It is likely that the central bank will use meager loan momentum as another reason for its new bond purchase program, since interventions in short-term markets may help to tackle the problem of increasing dispersion of rates,” Schubert said.

On Aug. 27, ECB executive board member Joerg Asmussen had said the recent cut in interest rates is not feeding through to the real economy.