Banks suffocate the real economy by denying loans

ECB governing council room . (ECB photo library).

Yesterday the European Central Bank released data on Eurozone bank deposits and loans for December 2012. According to this report deposits by households and the non financial business sector increased during 2012 by at least 4%, while the loans to private sector (non-financial businesses and households) continued to decrease. The diverging direction of increasing liquidity and deposits and the decreasing credits to the economy, stand witness of the continuation of the almost anti-social policies followed by the banking industry of Eurozone.

Despite this profoundly egotistic practice by commercial banks, the governor of the European Central Bank, Mario Draghi, insisted last week that governments should continue their austerity policies, because the financial sector of the single money zone is still…fragmented.

He means obviously that commercial banks are still reluctant to give out loans to support the resumption of activities and job creation in the real economy. And this presumably because Eurozone governments have not yet squeezed enough their subjects,, with more taxes and less social protection so as to create the new surpluses needed by the financial system to return to its old practices of risky placements and fat bonuses.

Bank loans to the non-financial business sector and households, the real players in the economy, are following a continuously declining course over the past five years. The only exemption to this continuous denial of the banking sector to support the real economy was towards the end of 2009 until the end of 2010 (for ECB financial statistics see the link below).

During the last months of 2009, in view of the then raging uncontrollable financial crisis, the ECB started to apply its extraordinary policies, giving out to banks trillions. In 2010 some of it found its way to the real economy. After 2010 however the banks returned to their selfish game of absorbing whatever liquidity was available, deposits and ECB loans alike and guarded it jealously, to cover the holes they had inflicted to themselves in the “good times”.

According to the European Commission services estimates over the past four years Eurozone banks have received €4.5 trillion in financial support. To this unbelievable sum of money delivered to practically bankrupt banks for free, one should add the deposits placed in the banks by the real business sector and the households.

Despite of that liquidity bonanza the Eurozone’s banking industry, during the last two years, is continuously decreasing its loans to the real economy, despite the fact that all along this time the single money zone was constantly increasing its creditworthiness.

Draconian fiscal austerity programmes and cuts on all and every facet of government expenditure, plus unlimited liquidity to banks from the ECB have gradually repelled any danger of Eurozone falling apart. Yet all that is not enough for the banking sector and Draghi wants Eurozone governments to keep squeezing their citizen, until the banks feel they can start again spinning around other people’s money.

ECB financial statistics: http://www.ecb.europa.eu/stats/money/aggregates/aggr/html/index.en.html.