Euro zone private loans contract, pressuring ECB to act

Wed May 29, 2013 6:23am EDT
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By Paul Carrel and Sakari Suoninen

FRANKFURT (Reuters) - Loans to the euro zone's private sector contracted for the 12th month in a row in April, raising pressure on the European Central Bank to take fresh policy action to help lift the bloc out of recession.

Loans fell 0.9 percent from the same month a year ago, ECB data showed on Wednesday, a slightly bigger fall than the mid-range forecast for a drop of 0.7 percent in a Reuters poll of economists. EUM3PC=ECI

The ECB, which meets next week, has flooded banks with money but many still remain wary of lending to businesses - particularly in the recessionary periphery of the euro zone - against a weak economic backdrop and uncertain outlook.

Banks granted non-financial firms 18 billion euros less in loans in April than in the previous month, data adjusted for sales and securitizations showed, after a fall of 2 billion euros in March.

"The marked fall in lending to euro zone businesses in April ramps up pressure on the ECB to come up with concrete measures aimed at improving credit availability to companies, especially small and medium-sized ones," said Howard Archer, economist at Global Insight.

ECB data also showed that loan growth rates vary greatly between euro zone countries, with those hardest-hit by the debt crisis seeing big reductions.

In Spain, lending to firms, excluding banks, fell 8.8 percent from the same month a year earlier. Ireland saw a 5.6 percent decrease, while lending fell 3.3 percent in Greece and 3.5 percent in Portugal.

German lending growth to firms was just above zero, as it recorded a 0.3 percent annual growth rate. Growth in the Netherlands, Finland and France was faster than that.   Continued...

A structure showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt July 11, 2012. REUTERS/Alex Domanski