Back
27 Mar 2014
Private lending contraction continues for Eurozone
FXStreet (London) - Eurozone private lending contracted further than expected in February, according to data released by Eurostat. Year-on-year private lending fell by 2.2 percent last month, showing a slower deceleration of credit contraction than consensus expectations. Forecasts had been for a 2.1 percent drop.
Ineffective central planning
Loans to the private sector have been in an accelerating decline since 2012, stifling much-needed business growth in the Eurozone. Today’s figure indicates that lending remains firmly in contraction and there seems to be little that policymakers can do from a top-down approach, despite how hard they try.
Recent German data has been worrying for those who rely on expectations that the core Eurozone country can carry the other weaker European states. However, weak German factory orders as well as below-expected Ifo and Zew indices suggest that Europe cannot pin its hopes on German demand.
No post-AQR pick-up
There had been some expectations that the European Central Bank's Asset Quality Review had depressed lending last year, and that we would see a recovery in 2014. However, here is little to show in the data-to-date that there is any thawing of the frozen private credit conditions in the Eurozone, despite deposit rate cuts from the ECB and even the mooted possibility of a negative deposit rate in a bid to get banks lending.
At the same time, euro area inflation remains at a feeble 0.7 percent, according to eurostat statistics released for February, down from 0.8 percent in January.
While the private loans number in itself will not be enough to trigger action from policymakers, it will add to the pressure on ECB officials to do… something. But at the moment, all options appear to remain on the table for European policymakers as European stagnation continues.
Ineffective central planning
Loans to the private sector have been in an accelerating decline since 2012, stifling much-needed business growth in the Eurozone. Today’s figure indicates that lending remains firmly in contraction and there seems to be little that policymakers can do from a top-down approach, despite how hard they try.
Recent German data has been worrying for those who rely on expectations that the core Eurozone country can carry the other weaker European states. However, weak German factory orders as well as below-expected Ifo and Zew indices suggest that Europe cannot pin its hopes on German demand.
No post-AQR pick-up
There had been some expectations that the European Central Bank's Asset Quality Review had depressed lending last year, and that we would see a recovery in 2014. However, here is little to show in the data-to-date that there is any thawing of the frozen private credit conditions in the Eurozone, despite deposit rate cuts from the ECB and even the mooted possibility of a negative deposit rate in a bid to get banks lending.
At the same time, euro area inflation remains at a feeble 0.7 percent, according to eurostat statistics released for February, down from 0.8 percent in January.
While the private loans number in itself will not be enough to trigger action from policymakers, it will add to the pressure on ECB officials to do… something. But at the moment, all options appear to remain on the table for European policymakers as European stagnation continues.