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Business

Lending to eurozone businesses drops sharply

The European Central Bank has said the volume of loans granted by eurozone banks to businesses and households has gone down further. Its monthly report showed declining figures despite an end to recession.

Lending to businesses and households contracted sharply in August, figures published by the ECB showed Thursday.

The latest report revealed that the overall volume of granted loans in the 17-member eurozone dropped by 2 percent, after already declining by 1.9 percent in the previous month in a year-on-year comparison.

The data suggested the credit crunch in debt-stricken southern Europe was far from over, while in some other parts of the single-currency area there was simply continuously low demand for credit lines.

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"To my disappointment, lending dropped by another 11 billion euros ($14.9 billion) in August," HIS Global Insight economist Howard Archer told Reuters news agency. "Obviously, banks in many eurozone nations still don't put much trust in current economic developments, although recession in the area ended in the second quarter of the year."

KfW analyst Jörg Zeuner warned lending was falling more and more behind levels logged in the US.

"The credit volume in the eurozone has fallen by 6 percent since early 2010 while in the US it has risen by 6 percent over the same period," Zeuner noted. "That's simply not enough to ensure dynamic growth over here."

The ECB Governing Council will come together again next week to debate its monetary policy. Financial market pundits do not expect another lowering of interest rates any time soon. But ECB President Mario Draghi has recently hinted he would be willing to pump more ultra-cheap money into the financial system, should bond rates continue to rise unfavorably.

hg/rg (Reuters, AFP)

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