Eurozone crisis ‘drying up credit to households’

By Agence France-Presse
Monday, January 28, 2013 7:15 EDT
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People peer through the window of a Bentley car showroom on Berkeley Square in Central London. File photo via AFP.
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Bank lending to private households in the euro area contracted again in December as the region’s crippling debt crisis continues to put a freeze on demand for credit, data showed on Monday.

Eurozone bank loans to the private sector declined by 0.7 percent in December compared with the same month in 2011 after already shrinking by 0.8 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 — slowed last month.

Growth in the M3 indicator, which measures the amount of money in circulation, grew by 3.3 percent in December, compared with 3.8 percent in November.

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

[Image via Agence France-Presse]

Agence France-Presse
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