Brussels, Belgium (4E) – Lending in the euro area continued its fall in August, according to European Central Bank (ECB) data released Thursday, a sign that banks are not yet willing to lend even with signs that the 17-nation currency bloc has returned to growth.
Credit received by euro-zone companies dropped by 12bn euros ($16.2bn) in August, after a decline of 17bn euros in the previous month. However, loans to households saw some improvement, climbing by 4bn euros in August after a 3bn euro drop in July. In annual terms, loans to the private sector were down 2.0 percent in August, after falling 1.9 percent in July.
In terms of countries, August lending figures were negative in both monthly and annual basis and for both the strongest and weakest countries. In Germany, private sector credit fell in August by almost 4 percent from the previous month and 4.7 percent a year earlier. Loans to Greece’s private sector were down 0.3 percent on the previous month and 4.7 percent a year earlier.
Analysts say that there will be no sustained recovery unless banks start lending to businesses again. The sector is expected to benefit from the ECB’s stress test as well as a review of the large euro-zone banks’ balance sheets, leading to higher confidence in the sector and improvement in the banks’ own funding conditions. That renewed strength could prompt the banks to provide loans to firms and households in the euro area.