ECONOMY

Private sector credit in Greece shrinks 3.4 pct in April

Bank lending to Greece’s private sector contracted in April but at a slightly slower pace than a month earlier, central bank data showed on Wednesday, as tight credit conditions and a protracted economic slump sap demand for loans.

Credit shrank 3.4 percent year-on-year, the Bank of Greece said, compared to 3.5 percent in March.

Bank credit to the private sector has been contracting since mid-2011 on an annual basis, aggravating the country’s worst postwar economic slump.

Greece’s cash-strapped banks are charging interest rates of between 8 and 12 percent for loans, business groups have said, making it hard for firms to borrow.

The government expects lenders will be in a better position to fund the economy after next month, when their bailout-funded recapitalization is completed.

Credit to businesses, a narrower measure in the data than the private sector, declined 3.4 percent after a 3.6 percent drop in March, the Bank of Greece said.

Loans to households and private nonprofit institutions shrank 3.7 percent in April from a 3.6 percent drop in the previous month.

Deposits fell to 162.29 billion euros at the end of April from 164.08 billion in the previous month as Greek business and household bank deposits posted their biggest outflow in 10 months on worries over the Cypriot banking crisis.

[(Reuters]