Eurozone money supply growth plummeted in October and loans to firms contracted at a record rate, heightening the risk of a stalled recovery and Japanese-style deflation next year.
The European Central Bank said M3 money growth fell to 1.4pc from a year earlier, lower than expected and far below the bank's own 4.5pc target deemed necessary to keep the economy on an even keel.
Monetarists watch the M3 data -- covering cash and a broad range of bank accounts -- as an early warning signal for the economy a year or so in advance. "This a large dark cloud hanging over the eurozone in 2014; it means the public debt ratios in Southern Europe are at greater risk of exploding," said Tim Congdon from International Monetary Research.
Loans to non-financial companies shrank at an accelerating pace of 3.7pc, but with drastic differences between North and South. Yacine Rouimi from Societe Generale said total credit plunged by 5.7pc in Italy, 6.6pc in Portugal, and by an "alarming" 19.3pc in Spain....
The dire credit data may force the ECB to take bolder measures. The Süddeutsche Zeitung said the bank is exploring a variant of the Bank of England"s funding for lending, offering credit lines to banks provided loans are passed on to credit-starved firms......
www.telegraph.co.uk/finance/economics/...n-alert-for-2014.html