Eurozone March private sector lending negative: ECB

29th April 2010, Comments 0 comments

Eurozone bank lending to the private sector improved slightly in March but remained nonetheless in negative territory, the European Central Bank said Thursday.

Lending decreased by 0.2 percent compared with March 2009, a bank spokesman said, somewhat better than the decline of 0.4 percent in February.

On Wednesday, the ECB said banks had continued to tighten credit conditions in the first quarter and did not see a clear improvement in the near future.

Although the central bank has provided ample amounts of cash, commercial banks still find financing conditions on private equity markets difficult, the ECB said.

Credit demand has also remained weak as many companies and households wait for better times before applying for new loans.

Growth of the ECB's M3 money supply indicator, which measures cash, deposits and various other financial items, declined by 0.1 percent in March, following a decline of 0.4 percent in February.

Lending and money supply data illustrate consumer demand and overall activity in an economy.

Falling figures point to lower demand, which normally means inflation will ease and allow the ECB to cut interest rates. However, rates are already at a record low of one percent and are not expected to be cut further.

The 16-nation eurozone emerged from recession last year but its recovery is uncertain, and it must now tackle the sovereign debt crisis in Greece.

Higher unemployment and sluggish consumption are posing hurdles meanwhile to growth rates like those seen in Asia and the United States.wai/nh

© 2010 AFP

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