LTRO? Credit to the private sector frozen in the whole euro zone last January


By Tania Suárez, in Madrid | Today is the day: petitioners will submit their requests in the second Long-Term Refinancing Operation (LTRO) by the European Central Bank. On Wednesday the auction will be carried out, and the money will be distributed. Most experts estimate an amount slightly lower than the one expected by Mario Draghi (over €500 billion), and many see the LTRO with a positive feeling. However, the fact is that credit to the private sector was frozen in the whole euro zone last January, not only in the peripheral countries but also in the stronger ones.

According to experts at Afi, last January has been the worst beginning of the year since the credit crunch began, as far as credit granting to the private sector in the EZ is concerned. They explain in a report that there has been a flat growth in the month and credit to companies has fallen; besides, there has been a slowdown in the remaining market segments. As a matter of fact, the mortgage credit has switched from a sustained advance of the inter-annual 4% in 2011, to a growth under 2% in the last months.

One of the aims of the last LTRO was to normalise the lending activity. However, experts from Afi explain:

“it is soon to see and calculate the success of the last extraordinary measures approved by the ECB. Nonetheless, it is clear that the last credit data don’t show a recovery of the credit channels. Especially, if the signs of lack of credit movement begin to expand to the banking systems of the core countries in the Eurozone. Up until now, the core countries had been able to overcome the restrictions to obtain financing from capital markets”.

[EMU credit to private sector-aggregate data] Variation in January since 2007 in thousand million of euros. Source: Afi, Datastream]


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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