Euro zone lending falls for first time on record

Euro zone lending falls for first time on record

According to the European Central Bank (ECB), bank lending to companies within the euro zone declined for the first time ever in September, sparking fears that weak lending could hind a recovery within the economy.

The euro zone, which comprises 16 countries, is still officially in recession and the fall in lending comes at a time when European Governments are injecting funds into their economies to try to boost lending.

However, many analysts are hopeful that the bloc experienced positive growth in the third quarter and will exit recession. Its number 1 and 2 economies, Germany and France, have both exited recession after experiencing positive growth in the second quarter.

Meanwhile according to the ECB, lending fell at an annual rate of 0.3%, compared with an annual growth of 0.1% in August. Meanwhile, the annual rate of lending to households also declined by 0.3% and followed a fall of 0.2% in August.

Furthermore, mortgage lending fell at an even faster pace - by 0.6%.

Howard Archer at IHS Global Insight believes restricted lending could remain a “serious handicap” to recovery prospects.

Earlier this month, the ECB elected to keep interest rates for the euro zone on hold at the record low of 1%.

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