Wednesday, October 3, 2012

Euro Area Private Lending by MFIs takes a nose dive

The latest figures published by ECB reveals that private lending by Euro area Monetary Financial Institutions took a nose dive in August, and particularly those to financial intermediaries.  The finer details are revealed in the latest publication Sailesh Radha, chief market strategist of IMRA LLC, prepared for Yardeni Research Inc.  In the morning briefing that Dr. Ed Yardeni of Yardeni Research Inc. sent out to this clients on Monday, the October 1st, this is what he had to say:


"Will the Europeans ever get their act together? In last Thursday’s FT, James Mackintosh observed in his column: “Every time Europe’s leaders are given a breathing space by the European Central bank, they return to their petty disputes and progress stops.” While they ceaselessly debate about how to keep their monetary union from disintegrating, the stress on the euro zone’s economy is worsening. 

On Thursday, the ECB released data showing that monetary aggregates continued to grow in the euro area, with M2 up 3.2% y/y through August. However, M2 growth was negative in Spain (-7.3%, August ), Greece (-15.0%, July), Portugal (-6.2%, July), and Ireland (-3,5%. July). The ECB’s data also showed that lending by monetary financial institutions (MFIs, excluding central banks) to the private sector plunged by €766 billion (saar) over the past three months through August. That was mostly attributable to a big drop in loans by MFIs to other financial institutions. Now we know why ECB President Mario Draghi felt compelled in late July to promise to do whatever it takes to save the euro."

The monetary aggregates that that Dr. Ed is referring to is based on the Euro Area Monetary Aggregates publication prepared by IMRA LLC for Yardeni Research Inc.