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Business

Eurozone bank lending shrinks as recession bites

Despite being awash in cheap central bank money, banks in the eurozone are lending less to households and companies, recent data indicates. Moreover, the recession in the currency area still keeps inflation at bay.

In November 2012, bank lending in the 17-nation eurozone fell by 0.8 percent compared to the previous month, the latest available data published by the European Central Bank (ECB) on Thursday showed.

The figure dropped more sharply than predicted by analysts, who had forecast a decline by 0.5 percent in a poll carried out by the Reuters news agency. It supports the view that the recession in the eurozone worsened at the end of last year amid falling demand for credit from households and companies.

However, additional figures released by the ECB also suggest that inflation in the currency area may be largely under control as the amount of money in circulation failed to expand substantially.

In November, the so-called M3 money supply figure, which includes money in circulation plus savings deposits and liquid assets, grew by 3.8 percent - slightly more than the 3.4 percent average recorded for the months of August through October.

Early last year, the ECB pumped billions of euros into the eurozone banking system in an effort to shore up ailing lenders and to kickstart the eurozone economy. The move stoked fears of rising inflation.

Further evidence that such fears so far have failed to materialize came with the latest German inflation figures released on Wednesday, showing consumer prices in Europe's biggest economy rising by two percent in 2012, compared with 2.3 percent in 2011.

German inflation and the latest monetary figures might give the ECB reason to keep interest rates in the eurozone at a historic low, or even to cut them further in efforts to promote economic growth in 2013.

uhe/pfd (Reuters, dpa)