The ECB has done everything it can to give banks cheap money in the hope they will make loans and create economic activity but the latest data from the Italian Banking Association doesn’t show any sign of success.
- Loans to private sector down 2.0% in November, year-over-year
- Loans to households and firms unchanged year-over-year
- Non-performing loans as a portion of total lending 9.5% from 7.7% a year earlier
- Non-performing loans at highest since June 1998
There’s still a question of whether it’s a loan supply or loan demand problem but in a zero-growth environment with escalating defaults, there’s no good reason to borrow or lend.
The ECB can go ahead and buy Italian 10-year bonds at 2.03% but driving those 50 basis points lower isn’t going to spark lending/borrowing and it isn’t going to give Italy’s parliament a reason for reform.
