EU corporate lending growth slows as monthly flows dry up

Lending to euro zone companies slowed last month as the flow of fresh credit came to a halt with the bloc back in recession and banks tightening access to credit, European Central Bank data showed.

Lending to non-financial corporations in the 19-country euro area slowed to 7.0% in January from 7.1% month earlier, a relatively high level not far from a 10-year high of 7.4% hit in May.

But the monthly flow of credit to firms was a minus 0.2 billion euros as small rises in the bloc's biggest countries Germany, France and Italy were offset by drops elsewhere, including Spain and the Netherlands. With the pandemic shutting much of the euro zone economy, firms rushed last year to tap emergency credit lines, supported by government guarantees and central bank funding available to banks for rates as low as minus 1%.

But many have maxed out their credit lines and surveys indicate that banks are growing increasingly worried about not getting their money back, so they are continuously tightening lending standards to protect their own balance sheets. "The economic outlook remains very uncertain for a sustained pickup in business lending to occur," ING economist Bert Colijn said.

"This also means that the euro zone investment recovery continues to face headwinds in the short-run."

Household lending growth meanwhile slowed to 3% from 3.1%, broadly flatlining since April. The monthly flow of fresh loans, however, slowed to its lowest rate since last April. The annual growth rate of the M3 measure of money supply, mostly a reflection of the ECB's copious bond purchases, accelerated to 12.5% from 12.4%, in line with market expectations.

Two men suspected of supplying the bomb that killed Maltese anti-corruption journalist Daphne Caruana Galizia faced formal charges in a late-night court appearance under heavy security by armed police. Shortly before they appeared in court, the commissioner of police said late on Wednesday that on the basis of available evidence all those connected to the murder had now been arrested.

With members of the journalist's family in the courtroom, Robert Agius and Jamie Vella were charged with complicity in the murder of the journalist, who was killed by a car bomb as she drove out of her home in October 2017. Three men were accused in December 2017 of having detonated the bomb. One of them, Vince Muscat, admitted his role in the murder in a plea bargain on Tuesday and was jailed for 15 years.

A legal source said Vince Muscat had provided police with vital information about the case, which has shone a spotlight on corruption in the European Union's smallest country.

Millionaire businessman Yorgen Fenech, who is suspected by police of being the mastermind of the murder, was arrested in November 2019 after the murder plot's middleman, Melvin Theuma, was granted a pardon and implicated him. Fenech and all the other remaining accused men have pleaded not guilty. Prior to the arraignment, which continued past midnight, Police Commissioner Angelo Gafa told how the police had found machineguns, shotguns and pistols.