Bank survey highlights EU economic gloom

The answers that came back showed a "surge" in the level of fear on both sides of the table in a mini-credit crunch that will make it harder for Europe to avoid recession in the coming year.

Germany was the "notable exception" in terms of willingness to lend on the bank side.

Meanwhile, Belgium, Finland, Italy, Malta, the Netherlands and Spain saw a particularly "strong deterioration" in terms of demand for mortgages from rank-and-file consumers.

The ECB noted that the biggest "net tightening" of bank credit last quarter came in the areas of loans for large corporations and for house mortgages - by 19 percent and 11 percent, respectively, compared to quarter three.

It said around half of all banks in all euro-using countries also reported "significant difficulties" in getting other banks to lend them money for day-to-day operations.

It blamed the trend on worries about exposure to bad sovereign debt, "weak expectations" of economic growth in 2012 and new EU rules requiring banks to keep more rainy-day capital in reserve.

The drop in consumer demand could be due to the fact banks are seeking more collateral and higher prices for mortgages, causing a vicious circle.

The ECB also noted consumers are borrowing less for other purposes, with lower household spending on "durable goods" such as washing machines or cars and "a decrease in consumer confidence" generally.

The gloomy results come after a recent shift in emphasis by EU leaders from austerity programmes to measures designed to revive growth and create jobs.

The EU growth measures look to long-term reforms - such as making it easier to hire-and-fire and cultivating a new digital market - rather than out-and-out financial stimulus programmes.

Despite the shift, leading forecasters, such as the International Monetary Fund in Washington, are saying that recession is all-but inevitable in 2012.

The fund's chief economist Olivier Blanchard last week said: "The world recovery, which was weak in the first place, is in danger of stalling ... But there is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession."