Lending to businesses in the euro zone fell in December

Wednesday 29 January 2014 13.06
The ECB says that weak lending is slowing the region's recovery
The ECB says that weak lending is slowing the region's recovery

Lending to businesses in the debt-mired euro zone contracted sharply again in December, European Central Bank figures have shown, suggesting that economic recovery in the region remains fragile.

Private sector loans dropped by 2.3% in December in a year-on-year comparison, the ECB said, after already contracting by the same amount in November.

The ECB has long complained that weak credit is putting the brakes on recovery in the 18 countries that share the euro.

Analysts said that the renewed fall in bank lending to businesses clearly reflected an ongoing combination of limited supply and muted demand.

They said that banks believe the economic situation and outlook in many euro zone countries still provides an uncertain and risky backdrop in which to lend, despite the euro zone eking out modest growth since the second quarter.

The ECB also published its latest money supply figures, a preliminary indicator of inflation, showing a 1% increase in December after a rise of 1.5% in November.

That is way below the central bank's target growth of around 4.5%, which it views as compatible with inflation rates of just under 2%.

It was persistently low inflation that persuaded the ECB to trim its key interest rates to a new all-time low of 0.25% in November.