Loans to eurozone businesses drop sharply: ECB

FRANKFURT, July 25, 2013 (AFP) – 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