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European Loan Growth Accelerated in November, ECB Report Shows

Dec. 29 (Bloomberg) -- Loans to households and companies in Europe grew at a faster annual pace in November as the economic recovery boosted demand for credit.

Loans to the private sector rose 2 percent from a year earlier after growing an annual 1.5 percent in October, the European Central Bank in Frankfurt said today. That’s the fastest since April 2009. The rate of growth in M3 money supply, which the ECB uses as a gauge of future inflation, was 1.9 percent, up from 0.9 percent in October.

The ECB, which has held its benchmark interest rate at a record low of 1 percent since May 2009, this month predicted economic growth of 1.4 percent next year after about 1.6 percent in 2010. While Germany’s economy, Europe’s largest, is expanding at the fastest pace in two decades, other euro-area members such as Ireland, Spain and Portugal are struggling to create growth as they cut spending to rein in budget deficits.

“In the euro zone as a whole, the recovery isn’t going so badly,” said Michael Schubert, an economist at Commerzbank AG in Frankfurt. “We can expect a very moderate upward trend in loans to households and companies, and at the moment there is no major inflation worry.”

In the three months through November, M3 increased 1.3 percent from the same period a year earlier after gaining an annual 1 percent in the three months through October, the ECB said. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings. The annual rate of M1 money-supply growth decreased to 4.6 percent from 4.9 percent.

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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