THE DECLINE in lending to euro zone firms slowed to a near halt in November, bolstering hopes of an increase in credit to aid the region’s economic recovery.

Figures published by the European Central Bank (ECB) yesterday show that company loans rose €11 billion in the month, compared to a €10 billion drop in October, leaving them just 0.1 per cent weaker than the same time a year ago.

“This is a welcome, limited step in the right direction. This raises hopes that euro zone banks may be becoming more willing to lend to what they perceive to be less risky businesses,” said IHS Global Insight economist Howard Archer.

“It also hints that there has been a limited increase in companies looking to borrow to finance investment and business plans in reaction to recent improved activity.”

Meanwhile, inflation in Germany, Europe’s largest economy, unexpectedly accelerated in December as prices surged in the final month of the year.

The inflation rate, calculated using a harmonised European method, increased to 1.9 per cent from 1.6 per cent in November, the Federal Statistics Office in Wiesbaden said yesterday. From November, consumer prices jumped 1.2 per cent, the biggest monthly gain since December 2002.

The Bundesbank predicts an average rate of 1.7 per cent next year and estimates that the German economy grew 3.6 per cent in 2010, the most in two decades.

Germany’s economy is growing at a faster pace than its euro-zone peers, as countries such as Greece, Ireland, Portugal and Spain grapple with a sovereign debt crisis.

That is widening the divergences in the 16-nation currency bloc, making it harder for the ECB to set policy suitable for members.

European inflation held steady at 1.9 per cent in November, in line with the ECB’s price-stability definition of just below 2 per cent.

The central bank, which has left its key interest rate at a record low of 1 per cent since May 2009, this month forecast that euro zone inflation will average about 1.8 per cent next year and 1.5 per cent in 2012. German inflation averaged 1.2 per cent in 2010. – (Bloomberg/Reuters)