Bloomberg News

European Loan Growth Slowed in November Amid Crisis, ECB Says

December 29, 2011

Dec. 29 (Bloomberg) -- Growth in loans to households and companies in the 17-nation euro area slowed in November as the sovereign debt crisis damped demand for credit and banks tightened lending.

Loans to the private sector grew 1.7 percent from a year earlier after gaining an annual 2.7 percent in October, the European Central Bank said today. The rate of growth in M3 money supply, which the Frankfurt-based ECB uses as a gauge of future inflation, fell to 2 percent from 2.6 percent.

“Loan growth reflects the economy and we’re heading for a credit crunch,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s not going to get easier as banks deleverage next year.”

The ECB cut its benchmark interest rate to 1 percent this month, matching a record low, and loaned banks a record 489 billion euros ($632 billion) for three years to keep credit flowing to the economy. So far, banks are depositing excess cash back with the ECB at the overnight rate of 0.25 percent, incurring a loss rather than lending it for more elsewhere.

M3 grew 2.5 percent in the three months through November from the same period a year earlier, the ECB said. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings.

--Editor: Matthew Brockett

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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