ECONOMY

Businesses hit with costlier loans

Businesses are paying lenders more for loans despite the European Central Bank (ECB) having kept interest rates steady over the last nine months, according to data presented yesterday. The Bank of Greece, the country’s central bank, said that the average interest rate businesses were charged in December for loans of up to a year rose to 4.70 percent, from 4.49 percent the previous month. New loans signed in December for more than a year were negotiated at an average 3.24 percent interest rate, versus 2.99 percent previously. The cost of money has risen, even though the ECB has kept its benchmark interest rate at a historic low of 1 percent and pumped cheap amounts of money into the market through emergency lending facilities. Greek banks have reacted to the difficult conditions by tightening the lending tap, fearing that customers will not be able to repay loans as the Greek economy heads into its second year of recession. The annual pace of lending to households in Greece slowed to 4.2 percent in December from 16 percent the same month a year earlier. It could dip into negative territory by the end of 2010, according to some economists. Central bank data showed that interest rate hikes on savings deposits trailed increases to business loans. The interest rate on savings deposits for up to a year rose to 2.10 percent from 2.01 percent, while the one-day deposit rate was unchanged at 0.43 percent.