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Loans to eurozone businesses drop sharply

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(Globalpost/GlobalPost)

Loans to businesses in the debt-mired eurozone tumbled in June, the European Central Bank said Thursday, weakening a key component of any economic recovery.

Private sector loans dropped 1.6 percent last month in a year-on-year comparison, the ECB said, after a 1.1 percent decline in May.

Loans to households stagnated during the same period after falling slightly in previous months while credit to non-financial businesses plummeted 3.2 percent after a 3.1 percent drop in May and a 3.0 percent fall in April.

"Banks believe the economic situation and outlook in many eurozone countries still provides an uncertain and risky backdrop in which to lend," economist Howard Archer of IHS Global Insight said.

The Frankfurt-based ECB on Thursday also published its latest money supply figures, a preliminary indicator of inflation, showing a 2.3 percent fall in June after a 2.9 increase in May.

An ECB survey published Wednesday indicated that Europe's battered financial sector is showing tentative signs of healing, even if it is still too early to sound the all-clear.

Credit conditions in the euro area may still be tightening, but are set to do so at a slower rate in the coming months, the ECB found in its quarterly bank lending survey.

The net percentage of banks expecting to tighten their loan criteria for businesses and households was unchanged at 7.0 percent in the second quarter compared with the first quarter, the ECB said.

But the proportion was expected to decline to 1.0 percent in the third quarter.

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http://www.globalpost.com/dispatch/news/afp/130725/loans-eurozone-businesses-drop-sharply