German banks 'cutting eurozone loans'

30 July 2012

German banks are lending their lowest amount of money to weaker regions of the eurozone since before the onset of the global economic downturn, new figures have shown.

Data released as part of Morgan Stanley's analysis of statistics from the Bundesbank has revealed that cross-border loan agreements from financiers based in the region's largest economy have declined by around 20 per cent since January, the Financial Times reports.

The fall of net lending to Spain, Greece, Portugal, Italy and Ireland to a total of €241 billion ($297 billion) in the period leading up to May this year represents the weakest level of lending since 2005.

For instance, German banks' net loans to Italy contracted by 25 per cent throughout the opening stages of 2012.

Huw van Steenis, analyst at Morgan Stanley, commented: "We're concerned the balkanization of banking markets will act as a drag on lending, economic recovery and be a source of systemic instability."

By Gary Cooper

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