Euro lending falls for 8th month, suggests low borrowing costs fail

Loans to the private sector fell 0.7 percent from the same month a year ago, European Central Bank data showed, in line with the mid-range forecast in a Reuters poll of economists.

The monthly flow of loans to non-financial firms fell 22 billion euros in December after falling by 7 billion euros in November. The monthly flow of loans to households showed a drop of 3 billion euros after a rise of 6 billion euros in the previous month.

The cheap funds the ECB is pumping through the monetary system are still not reaching households and businesses evenly across the eurozone as some countries struggle to get their stricken economies back on track, though progress has been made.

On a country-by-country basis, the data showed a 22 billion euro drop in private-sector lending in Spain, the largest monthly fall since July.

In Portugal, private-sector lending fell by 2.6 billion, the biggest drop in a year.

“Although eurozone banks' liquidity positions improved during 2012, it is clear that this has had little effect in boosting private-sector lending,” said Howard Archer, economist at IHS Global Insight.

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