Bloomberg News

Euro-Area Loan Growth Slowed in April as Crisis Damped Demand

May 30, 2012

Growth in loans to households and companies in the 17-nation euro area slowed in April as the sovereign debt crisis curbed demand for credit.

Loans to the private sector grew 0.3 percent from a year earlier after gaining an annual 0.6 percent in March, 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, slowed to 2.5 percent from 3.1 percent.

The ECB has flooded markets with more than 1 trillion euros ($1.3 trillion) in three-year loans at its benchmark rate, which is currently at a record low of 1 percent, to prevent a credit crunch.

“The ECB has made sure that there is enough supply in the credit markets,” said Michael Schubert, an economist at Commerzbank AG in Frankfurt. “But as the economy is still weak, demand for credit continues to be low and the ECB can’t change that.”

Euro-area gross domestic product was unchanged in the first quarter from the prior three months.

Banks tightened credit standards less in the first quarter than in the previous three months, while credit demand from non- financial corporations and households continued to fall, the ECB said in its quarterly bank lending survey published April 25. For the current quarter, euro-area banks forecast an improvement in demand for corporate loans and a deceleration of the decline in loans to households.

M3 grew 2.7 percent in the three months through April 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.

To contact the reporter on this story: Joseph de Weck in Frankfurt at jdeweck@bloomberg.net

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


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