Eurozone credit crunch specter lingers on | Business| Economy and finance news from a German perspective | DW | 27.02.2012
  1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages


Eurozone credit crunch specter lingers on

European Central Bank data for January have shown that there's only been a slightly higher willingness of banks in the eurozone to lend to the private sector. Mistrust among the financial institutions is still strong.

Eurozone banks are still rather reluctant to lend money to the private sector, The European Central Bank's monthly data showed on Monday. Growth in loans to private entrepreneurs picked up only marginally to just 1.1 percent in January, up from 1.1 percent in the previous month.

The ECB logged only a small increase in bank lending despite an end-of-2011 series of measures geared to easing the credit crunch in the eurozone.

In December of last year, the ECB lent banks as much as they wanted for a period of three years – and at very low interest rates. Banks actually borrowed almost half a trillion euros ($671 billion). A second follow-up auction of cheap cash is already being planned.

But the ECB's data showed that since the unprecedented cheap cash supply, banks have largely been parking record amounts of money in the Central European Bank's overnight storage facility instead of lending it to others.

Analysts see this as a sign that the there's still a lack of trust among banks that has its origin in the eurozone debt crisis.

Still on shaky ground

"The positive psychological impact of the ECB's long-term refinancing operation on markets and particularly on government bond markets has been obvious from the start," ING Belgium Senior Economist Carsten Brzeski told AFP news agency. "The economic impact, however, remain still unlimited," Brzeski maintained.

The ECB's monthly data may dilute the worst fears of a major credit crunch in the eurozone, but uncertainties remain in the marketplace nonetheless. "[The data] by no means eliminate the concerns of tight credit conditions," IHS Global Insight economist Howard Archer confirmed.

The European Central Bank also calculated the M3 eurozone money supply, a key indicator of demand in the economy. It said growth of supply picked up by 2.5 percent last month after slowing to 1.5 percent in December.

The ECB uses the M3 indicator as a vital barometer for inflation pressures, adopting its interest rates accordingly.

hg/slk (AFP, Reuters)