ENM: Euro zone interest rates falling faster in debt-saddled south: ECB data
FRANKFURT: Interest rates banks charge companies in debt-ridden southern Europe are falling more than in core euro zone nations, although the gap between them remains wide, European Central Bank data showed on Tuesday, in a trend it will welcome.
The ECB must treat all banks in the 17-country bloc alike, regardless of the financial strains any individual country may be experiencing, and it cannot tailor its policy to each country separately.
Since the start of the financial crisis, and particularly Europe's sovereign debt problems, banks in the debt-ridden south have charged much more for loans, hampering the ECB's work as it tries to steer the economy back to robust growth.
Interest rates charged on new loans in July, however, fell most in the countries where they were the highest.
Rates charged on corporate loans of 250,000 to 1 million euros ($330,000-$1.3 million), used mainly by small and medium-sized enterprises, or SMEs, fell by 6 basis points in the euro zone as a whole in July from the previous month.
The reduction in borrowing costs was the greatest in Greece, where they fell more than half a per centage point in a month and almost a full per cent compared with July 2012.
Rates for those loans also fell in Spain, although they are still well over twice as high as in Belgium, where they are the lowest, showing that the situation is still very uneven across the bloc, even as rates in Belgium ticked up.
The ECB's measure of country-to-country variation in the loans favoured by SME's fell to its lowest level since August last year.
Interest rates for new large corporate loans fell most in Portugal, Slovenia and Greece. They were the highest and still rising, in Cyprus, the latest country to receive a bailout package from its European partners.
Firms on the island had to pay more than three times as much in interest for loans of more than 1 million euros than their peers in Belgium, where also these loans were the cheapest in the euro zone. The average rate in Belgium was 1.87 per cent, compared with 6.34 per cent in Cyprus.
Country-to-country variation on large corporate loan interest rates fell to its lowest since last November, but remains well above levels seen before last year.
