Frankfurt: Fears of a credit squeeze in the Eurozone refused to go away yesterday as data showed that bank lending to the private sector remains fragile, despite recent unprecedented injections of liquidity.

The European Central Bank calculated in regular monthly data that growth in loans to the private sector picked up only fractionally to just 1.1 per cent in January from 1.0 per cent the previous month.

In December, in a series of special liquidity measures precisely to avert a credit squeeze in the 17 countries that share the euro, the ECB launched its longest-ever liquidity operations, lending Eurozone banks as much as they wanted for a period of three years at super-cheap rates.

Banks in the region queued up in their hundreds to borrow nearly half a trillion euros in the first-ever such operation and a second follow-up auction of cheap cash is scheduled later this week.

Nevertheless, there have been concerns that banks are simply hoarding the cash, rather than lending it to businesses and households as the ECB hoped they would.

Ever since then, daily ECB data show that banks have been parking record amounts of cash in the central bank's overnight storage facility.

In normal times, banks shy away from depositing cash at the ECB, preferring to lend any overnight surplus to other banks, where they earn a higher return.

But analysts say the Eurozone debt crisis has spawned a lack of trust between banks, meaning that institutions are opting to store the money at the ultra-safe ECB rather than lending it to their peers.

ING Belgium senior economist Carsten Brzeski said the latest lending data showed the danger of a credit crunch had not yet been averted.

"Today's numbers have been awaited eagerly as they give a first impression of the impact of the ECB's first three-year LTRO [long-term refinancing operation] on the Eurozone economy," Brzeski said.

"The positive psychological impact on markets and, particularly, government bond markets has been obvious from the start. The economic impact, however, remains still limited," he said.

"Even if the ECB has managed to restore calm in markets, being the lender of last resort for the financial system, its job as the economy's lender of last resort is not done yet," Brzeski said.

Howard Archer, European Economist at IHS Global Insight, similarly believed that although an "essential stabilisation in lending to businesses in January…dilutes the worst fears of a major credit crunch in the Eurozone, it by no means eliminates the concerns over tight credit conditions."

Christian Schulz, senior economist at Berenberg Bank, was more positive.

The ECB's LTRO and the recent rate cuts have "led to a reversal of tentative signs of a credit crunch that emerged in the December data," he said.

The ECB also calculated that growth of the Eurozone money supply, a key indicator of demand in the economy, picked up in January after falling for three consecutive months.

The M3 indicator rose 2.5 per cent last month after slowing to 1.5 per cent in December. The ECB regards the M3 figure as a key guide to inflation pressures and uses it to set interest rates accordingly.

The central bank seeks to keep Eurozone inflation below but close to 2.0 per cent but it stood at 2.7 per cent in January.