QE helps Euro-area governments borrow but SMEs still struggle
Eurozone governments benefiting from cheap debt on the markets are to accelerate borrowing far quicker than the private sector, according to new figures from the European Central Bank (ECB).
Lending to Eurozone companies and households grew at its fastest pace since late 2011 in February, suggesting that a modest recovery is continuing across the currency union despite falling inflation and slowing global growth, ECB data showed yesterday.
The figures, which are not broken out by country, show that bank loans to non-financial corporations increased by 0.9pc year on year, clocking up their best growth rate since December 2011.
It's enough to keep alive a sluggish and uneven recovery that started in 2014. Lending had grown by 0.6pc in January.
Household lending growth picked up to 1.6pc, the fastest since November 2011, from 1.4 percent in January, led by mortgages and consumer credit.
In contrast, according to the same ECB figures the annual growth rate of credit to general government increased to 10.1pc in February.
The annual growth rate of credit to the private sector as a whole increased to 1.2pc.
The data suggests euro-area governments rather than the so-called real economy of SMEs and households is getting the biggest benefit from the ECB's massive lending initiatives.
Many states, including Ireland, can now borrow on the markets at rates at or below zero.
That has been driven by the ECB's purchase of hundreds of billions of euro worth of bonds in the past year in a bid to kick-start lending to drive up growth and inflation.
The bond purchases will increase by a third this month, but the latest data suggests there is little to show for it so far.
Based on consumer prices, Eurozone inflation fell by 0.3pc in February and may have slipped by 0.1pc in March.
A slowdown in China and other emerging economies helped push down Eurozone inflation.
So far bank lending has held up, but the pace of growth is low and uneven.
Corporate loans with a duration of more than five years, the key element of bank funding for Eurozone companies, rose by just 0.5pc in February, slower than in the previous two months.
But loans with a maturity of between one and five years, which account for a small portion of the total, jumped by 6.3pc - the fastest pace since 2009.
The annual growth rate of the M3 measure of money circulating in the Eurozone, which is often an indicator of future economic activity, was unchanged at 5.0pc.
Growth in M3, which includes long term bank deposits, holdings in money market funds and some debt securities, peaked at 5.4pc in April 2015 and has been flat-lining since then. (Additional reporting Reuters)
Annual growth rate of credit to general government
Annual growth rate of credit to the private sector as a whole
The unchanged annual growth rate of money in circulation