Eurozone lending slides again

Bank lending to businesses and individuals in the eurozone remains weak, with loans to companies and households contracting again in December. The low interest cash the European Central Bank has been pumping through the monetary system is mostly staying in high street banks’ vaults or is even being repaid to the ECB. The ECB believes that reflects weak demand for loans, rather than an unwillingness by the banks to lend. Loans to the private sector fell 0.7 percent from the same month a year earlier, continuing a trend that has lasted for eight months. The problem is that with overall eurozone growth weak, people do not want to risk borrowing to launch new projects or expand existing businesses. On a country-by-country basis, the ECB figures showed a 22 billion euro drop in private-sector lending in Spain, that was the largest monthly fall since July. In Portugal, private-sector lending fell by 2.6 billion, the biggest drop in a year. Across the eurozone analysts do not believe an upturn is likely any time soon. “The much more positive sentiment about the eurozone’s future that has prevailed in financial markets so far this year will probably take some time to materialise in greater credit availability and economic growth,” Oxford Economics’ analyst Marie Diron said.