Lending to eurozone households and companies contracted for the 29th month in a row in September, although at a slightly slower pace, despite the European Central Bank stepping up its efforts to get credit flowing again and revive growth.

Eurozone banks, especially in crisis-stricken countries, have tightened their purse strings in response to tougher capital requirements and a health check of the sector, while companies have held off investments, unsure of the future.

To solve the problem, the ECB has started offering banks four-year loans at ultra-cheap rates and has begun buying covered bonds. It also plans to buy asset-backed securities to ease the burden on banks’ balance sheets and entice them to lend, but these measures will take time to gain traction.

In September, loans to the private sector fell by 1.2 per cent from the same month a year earlier, after a contraction of 1.5 per cent in August, ECB data showed yesterday.

Eurozone M3 money supply – a more general measure of cash in the economy – grew at an annual pace of 2.5 per cent in September, up from 2.1 per cent in August.