Credit crunch continues to bite

Credit expansion continued to head south in the month of September, according to Bank of Greece data released on Monday.

The deterioration in financial conditions and liquidity levels led to a 2.2 percent annual decline in the annual growth rate of funding for the local private sector compared with September 2010. In August the annual decline stood at 1.3 percent.

The net flow of funding in September declined by 1.06 billion euros from the same month last year. On September 30 it stood at 252.9 billion euros, compared with 257.8 billion in December 2008.

Bank officials suggest that the negative credit flow, whereby new loans are smaller than loan repayments, is due to the shrinking in deposits and the inability of local lenders to draw funds from the interbank market.

At the end of September the loan balance to enterprises came to 122.6 billion euros, down from 123.2 billion in December 2010. Funding flow to personal companies, farmers and the self-employed was negative by 108 million euros, having been positive by 133 million in September 2010.