The European Central bank said that while borrowing costs have dropped, they continue to vary greatly across the euro area and banks remain hesitant to lend to the private sector.
“The cost of short-term bank lending to euro area non- financial corporations has declined since early 2012, mainly reflecting the pass-through of reductions in key ECB interest rates and market interest rates,” the Frankfurt-based ECB said in its monthly bulletin today. “Still, borrowing costs continue to vary greatly across euro area countries, reflecting differences in banks’ funding conditions and country-specific economic developments affecting the creditworthiness of borrowers,” it said. Lending to the non-financial private sector “remains weak.”
ECB President Mario Draghi in September announced an unlimited bond-buying program, saying the bank’s record-low interest rates aren’t reaching borrowers because of unjustified fears of a euro breakup. Since then, bond yields in countries like Spain and Italy have fallen.
“In autumn 2012, net issuance of long-term debt securities by banks resident in the euro area was significantly less negative than it had been in previous months,” the central bank said today. “At the same time, interbank trading volumes remain low and concentrated in the shortest maturities.”
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