The three main gauges – M1, M2, and M3 – have each begun to decline in absolute terms after slowing sharply over the Autumn.
The broad M3 measure tracked closely by the European Central Bank as an early warning indicator shrank last month by €59bn to €9.78 trillion, a sign that Europe's long-feared credit squeeze is underway as banks retrench to meet tougher capital requirements.
"This is very worrying," said Tim Congdon from International Monetary Research. "What it shows is that the implosion of the banking system on the periphery is now outweighing any growth left in the core. We are seeing the destruction of money and it is a clear warning of serious trouble over the next six months."
"This is the first sign of an emerging credit crunch," said James Nixon from Societe Generale. Banks cut their balance sheets by €79bn in October, while mortage lending saw the biggest drop since December 2008.
Simon Ward from Henderson Global Investors said "narrow" M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South. (...)
The grim monetary data came as Moody's warned that Euroland's crisis is metastasising, with risks of a chain of sovereign bankruptcies unless Europe "acts quickly" to stop the rot. "The probability of multiple defaults by euro area countries is no longer negligible."
The agency said defaults would threaten to break up the euro itself. "Any multi-exit scenario would have negative repercussions for the credit standing of all euro area and EU sovereigns."
by Ambrose Evans-Pritchard, Telegraph | Continue reading:
