ECB lending up as banks lose trust

Tim Wallace
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BANKS increased borrowing from the European Central Bank (ECB) as concern grew over access to finance, figures out yesterday revealed.

Institutions borrowed €4.14bn (£3.64bn) overnight on Tuesday, in the wake of the failures of Dexia, Max Bank and Proton Bank.

Lending has remained high at over €1bn each night for more than a week. Overnight deposits also jumped at the start of this week because banks were concerned about each others’ credit-worthiness.

Meanwhile, falling revenues pushed Greece’s budget deficit wider over the nine months to September, the government announced in a statement yesterday.

The deficit for 2011 so far stands at €19.2bn – a 15.1 per cent rise on the deficit for the same period of 2010, which stood at €16.65bn.

The government announced that expenditure increased by seven per cent compared with the first nine months of last year.

Debt servicing costs increased by €2.38bn, social security funds were given an extra €1.8bn to make up for reduced receipts from workers as unemployment increased, €306m extra was spent on unemployment benefits, and hospitals needed €834m more to cover current and past procurement expenditures.

An initial budget deficit target of 7.6 per cent of GDP was set, but Greece is now aiming to hit 8.5 per cent.