Page last updated at 12:44 GMT, Tuesday, 27 October 2009

Eurozone lending sees first fall

Euro notes
Governments are pumping euros into the financial system

Bank lending to companies operating in the eurozone fell in September for the first time on record, according to the European Central Bank.

Lending fell at an annual rate of 0.3%, compared with a modest annual growth of 0.1% in August.

The fall comes at a time when European governments are pumping money into their economies to try to lift lending.

The worry is that weak lending from banks will hinder any recovery in the eurozone economy.


The annual rate of lending to households also fell by 0.3%, following a fall of 0.2% in August.

Mortgage lending fell at an even faster pace, by 0.6%.

"The September credit data reinforce concerns that weak bank lending could hold back eurozone recovery," said Howard Archer at IHS Global Insight.

He added that restricted lending could remain a "serious handicap" to recovery.

But some analysts pointed out that the fall in lending did not necessarily show that government stimulus policies were not working.

The money may be available to lend, but companies may simply not want to borrow it, as they are concentrating on survival rather than expansion, they argued.

"You still can't say there is a credit crunch," said Michael Schubert at Commerzbank.

"The breakdown shows that it is mainly the lower demand on the part of businesses because of the recession that has led the fall in credit."

The eurozone is still officially in recession, although most analysts expect upcoming figures to show that the bloc returned to growth between July and September.

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