Banks in the Eurozone reduced loans to companies in October for the first time since the summer of 2015, according to data from the European Central Bank (ECB).
Bank lending to companies decreased by 0.3 percent in October compared to the same month last year, following a 0.2 percent increase in the previous month, the ECB reported.
Banks last reduced credit allocations to companies in July 2015, when the Eurozone began to recover from the debt crisis.
Household lending, on the other hand, increased by 0.6 percent in October, the weakest since early 2015. In September, it had increased by 0.8 percent.
The reduced lending to companies and limited money supply are a result of the tightened monetary policy of the ECB, which raised interest rates by 4.5 percentage points from July last year to mid-September this year to curb inflation by slowing demand.
Stricter financing conditions have resulted in a decline in economic activity in the area using the common currency in the third quarter, and S&P Global estimates in its latest monthly business activity survey that the Eurozone could enter a recession by the end of this year.
Some analysts now fear that the ECB has overstepped with interest rate hikes and that lending has become so restrictive that it could deepen the recession or slow the economic recovery next year, Reuters notes.
