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Euro zone lending growth levels off

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Euro zone lending growth levels off
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FRANKFURT (Reuters) – Lending growth to euro zone households and companies held steady in April while a broader indicator of money circulating in the currency bloc, which often foreshadows future activity, rebounded, European Central Bank data showed on Tuesday.

Lending to non-financial corporations expanded by 3.3 percent in April while household lending grew by 2.9 percent, both unchanged from the previous month, the ECB said in a regular monthly statement.

Buying around 2.5 trillion euro worth of debt in the past three years, the ECB has laboured away to depress borrowing costs and kick start lending, all in the hope of rekindling growth and inflation.

While its efforts have mostly paid off, growth has softened in recent months, raising concerns that the ECB could struggle to remove stimulus, particularly if political uncertainty in Italy dents investor sentiment and causes borrowing costs to rise.

Lending growth, which accelerated for most of last year has also appeared to level off this year, holding well below its pre-crisis mark and indicating that the bank sector is still far from healthy.

Weighed down by bad debt often a decades old, many lenders remain reluctant to lend to the real economy while they struggle to repair their balance sheets.

The annual growth rate of the M3 measure of money supply, seen by some as a precursor of economic activity, rose to 3.9 percent in April from 3.7 percent a month earlier, in line with expectations for 3.9 percent. But its rate is still well below the 4.2 percent growth recorded in February.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)

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