Euro zone lending shows sign of turnaround as morale improves

Thu Feb 26, 2015 6:17am EST
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By Paul Carrel and John O'Donnell

FRANKFURT (Reuters) - Bank lending in the euro zone fell slightly in January but at a slower pace than a month earlier, suggesting the economy may be turning a corner as consumer morale picks up in the bloc's largest economies.

European Central Bank President Mario Draghi said late on Wednesday that "all in all, the outlook is more positive than it was a few months ago" in the 19-country euro zone, which has been blighted by recession in the south and falling prices.

Sparse lending to firms continues to dog the economy, but data released by the ECB on Thursday showed the overall level of lending to households and firms in the euro zone fell by 0.1 percent in January from a year earlier, after a 0.5 percent drop in December. Lending has not risen since July 2012.

"We have been seeing an across-the-board improvement to banks' willingness to lend and also in the demand for credit," said Reinhard Cluse, an economist with UBS.

"We are making good progress in healing the European banking sector but we are coming from a very low base. The way to recovery is still long. We shouldn't expect any miracles."

German consumer sentiment jumped to its highest level in more than 13 years heading into March, a separate report showed, as low oil prices freed up consumer cash to spend on other things.

Consumer confidence hit a near three-year high in France this month and rose sharply in Italy, raising hopes for recovery of the stagnant economy.

The more positive tone comes as the ECB prepares to start printing money to buy sovereign bonds next month - a policy measure aimed at perking up the economy and lifting inflation, which is running at -0.6 percent, back into positive territory.   Continued...

A picture illustration taken with the multiple exposure function of the camera shows a one Euro coin and a map of Europe, January 9, 2013.  REUTERS/Kai Pfaffenbach