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European Central Bank data showed on Friday that overall lending
growth to households and firms was unchanged in the month,
despite the recent launch of a massive money-printing programme
to bolster the 19 countries in the euro bloc.
Although the fact that lending is holding steady is positive in
itself, following years of decline, the stagnation in April will
disappoint those who had predicted a modest improvement,
including in a Reuters poll.
Sparse lending to companies has dogged the struggling euro zone
economy although the picture had been improving and policy
setters including ECB President Mario Draghi believe that the
bloc is recovering.
But the fact that banks are lumbered with billions of euros of
loans that may go unpaid and consumers and companies are wary of
borrowing is blunting the full impact of the 1 trillion
euro-plus ECB scheme to buy chiefly government bonds.
Although overall lending is flat, detailed data shows that
lending to companies or consumers is actually in decline, with
only borrowing by home buyers brightening an otherwise bleak
picture.
Lending to businesses fell by 0.4 percent annually, albeit an
improvement on the previous month, where the fall was even
steeper. Consumer credit to buy cars or holidays is also in
decline, down by 0.1 percent.
Lending for home buyers, on the other hand, is on the rise and
it picked up by 0.1 percent for the second month running in
April.
The trend underscores the limitations - at least so far - on
so-called quantitative easing or money printing to buy
government bonds.
"Lots of the ECB's money is going into mortgages," said Carsten
Brzeski, an economist with ING. "Construction is booming in
Germany. The rest is being hoarded or spent on bonds and
shares."
"Much more powerful channels for the ECB to restore growth would
be consumption or business investment."
The ECB said that the M3 measure of money circulating throughout
the 19 countries in the euro zone grew, however, by 5.3 percent
in April.
(Editing by Jeremy Gaunt)
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