Steep decline in euro zone lending


Lending to households and companies in the euro area contracted at the fastest pace in almost three years in September amid a deepening economic slump. Loans to the private sector fell 0.8 per cent from a year earlier after dropping an annual 0.6 per cent in August, the European Central Bank said yesterday. That’s the fifth decline in a row and the steepest since October 2009.

Loans contracted 0.2 per cent in the month. The 17-nation euro economy may have fallen into recession in the third quarter after shrinking 0.2 per cent in the previous three-month period. While the ECB’s pledge to buy unlimited bonds of debt-strapped countries has shored up investor confidence, business sentiment in Germany, Europe’s largest economy, unexpectedly declined in October to the lowest in more than 2 and a half years.

“Lending growth is likely to remain weak for quite some time, partly because we expect the economy to remain weak,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “We’re not seeing any sharp declines in output but no strong growth either. We don’t expect a sustained uptrend before the second half of next year.”– Bloomberg