Statistics released by the European Central Bank (ECB) indicated that the eurozone is in a liquidity trap, economists with a German bank said on Friday.

Afte analyzing the liquidity provided by the ECB to the banking system and the money outside the banking system, economists with Berenberg Bank concluded in a note that the stimulus from the rate cuts and the ECB liquidity injections has become stuck in the banking system.

Although the liquidity provided by the ECB to the banking system rose by 65 percent in the year to May 2012, the money circulating in the economy outside the banking system, namely M1, has increased by just 4 percent, said the note.

It also argued that more rate cuts or further liquidity injections into the banking system will not be enough to lift the eurozone out of recession.

"Instead, the ECB needs to make sure that its monetary stimulus actually reaches the real economy. Otherwise, the eurozone could gradually slide towards deflation amid a deepening recession," said the note.

It suggested that the best way to break the current cycle of fear and repair the transmission mechanism of monetary policy would be a clear ECB statement that it will not let any solvent sovereign go bust.

However, economists with Berenberg Bank expect the ECB to hesitate further, but to step in more decisively eventually in line with its mandate to guard against downside risks to price stability.