Spanish banks' debt to ECB drops again in December

14th January 2013, Comments 0 comments

The debt owed by Spanish banks to the European Central Bank fell in December for the fourth straight month, official data showed Monday, a sign that Spanish lenders are having an easier time financing themselves on the interbank market.

Net borrowing dropped 8.1 percent to 313.1 billion euros ($417.7 billion) in December from the previous month, the Bank of Spain said. Borrowing was up sharply, however, from the December 2011 figure of 118 billion euros.

Borrowing by Spanish banks from the ECB hit a record high of 388.7 billion euros ($518.6 billion) in August last year when Spain was at the frontline of the eurozone debt crisis.

The growing reliance on the eurozones central bank was fuelled by the ECBs decision to pump more than 1.0 trillion euros in cheap loans into the European banking system.

The ECB extended the money in two operations in December 2011 and February 2012 as it sought to avert a dangerous credit squeeze tightening around the bloc.

In early September, the ECB offered a new lifeline to stricken member states, saying it would buy their sovereign bonds on the open markets so as to curb high borrowing rates.

But the offer depends on the recipient nations first applying for help from the eurozones new bailout fund, the European Stability Mechanism, and submitting to its strict conditions. That is a step Spanish Prime Minister Mariano Rajoys government hesitates to take.

Spain secured a rescue loan in June of up to 100 billion euros from its eurozone partners for its banks, which are struggling with a surge in bad loans following the collapse of a property bubble in 2008.

© 2013 AFP

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