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FRANKFURT (Reuters) - Lending to companies in the euro zone contracted at the fastest pace on record in November, piling pressure on the European Central Bank to do more to revive the currency bloc's economy.
The ECB has cut interest rates to a record low, pumped extra liquidity into the banking system and announced a yet-to-be-used government bond purchase program, but the measures have so far not reached all corners of the euro zone evenly.
"Worryingly, there is still no sign of any trend change in bank lending to euro zone businesses, which heaps pressure on the ECB to act," said Howard Archer, chief European economist at IHS Economics.
"Banks likely believe the economic situation and outlook in many euro zone countries still provides an uncertain and risky backdrop in which to lend, despite the euro zone eking out modest growth since the second quarter."
The ECB's upcoming health check of banks' balance sheets is exacerbating the situation, with lenders reluctant to take on more risk and trying to slim down their loan books instead.
ECB Vice-President Vitor Constancio said last month that about two-thirds of the weakness in bank lending is due to a lack of demand from firms and households, with credit supply having some impact on the slump.
The ECB is unlikely to launch new measures when it meets next week after its president, Mario Draghi, said earlier this week there was no need for immediate action.
But over the next couple of months, the ECB could, for example, decide to stop sterilising the value of its previous government bond purchases, especially as it has now failed to take out the full amount for three weeks in a row. This would leave more liquidity in the system.
Corporate borrowing in the euro zone overall declined at the fastest pace on record, November's 3.9 percent drop comparing with a 3.8 percent decline on the year in the previous month.
The biggest decline was in Spain, where lending to companies fell 13.5 percent, although the contraction was less steep than in October.
Bank lending to Italian firms fell at an annual pace of 5.9 percent in November, the sharpest decline in the measure's 10-year history. That was also true for the euro zone's smallest economy, Malta, which recorded a 10.4 percent drop.
Only five euro zone countries saw corporate lending grow in November, with France the only large economy among them. Finland showed the biggest increase, of 5.4 percent.
Companies in Finland pay an interest rate on loans roughly one-third of that charged to their counterparts in Greece and Cyprus, ECB data from October showed. The big variance in borrowing costs for firms across the euro zone - now expanded to 18 members following Latvia's accession on January 1 - is cited as one reason for the uneven levels of corporate lending.
This divergence has persisted since the beginning of the sovereign debt crisis in 2010 and has become a real headache for the ECB, as its record-low interest rates do not benefit all parts of the currency bloc equally.
Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual pace of 1.5 percent, picking up slightly from 1.4 percent in October and in line with the consensus forecast in a Reuters poll of analysts.
Reporting by Eva Taylor and Sakari Suoninen; Editing by Catherine Evans