Household credits dry up

Bank lending to the private sector in the 17 member euro area contracted again in September, the European Central bank (ECB) said in its monthly report on Thursday.

Eurozone bank loans to households and companies shrank by another 0.8 percent last month after already contracting by 0.6 percent in August. The drop in loan volumes that reached the real economy in September was more pronounced than analysts had expected.

ECB President Mario Draghi said weak lending reflected a pessimistic view of eurozone growth prospects and heightened risk aversion amid the bloc's protracted sovereign debt crisis.

Ineffective antidote

The ECB had offered banks across the euro area more than one trillion euros ($1.3 trillion) in cheap long-term loans in a bid to ease lending pressures. But while banks have also absorbed huge sums, only a tiny fraction has been lent to the private sector amid fears that loans might never be paid back.

The European Central Bank on Thursday also published money supply data for the euro area, indicating that growth of the amount of money in circulation and deposited at banks slowed to an annual 2.7 percent in September, down from 2.8 percent in August.

The underlying M3 indicator is regarded by the ECB as a key guide to inflation pressures and is used by the central bank to set interest rates accordingly.

hg/kms (AFP, Reuters)