Financial Times
December 21, 2011
It's "Merry Christmas from the ECB" today, but not, I fear, a happy and prosperous New Year.
The high take-up of the ECB's first three-year lending programme for Europe's banks provides a good reason for the financial markets to be cheerful, which I highlighted in my blog on Monday 12 December. As I said then, this new lending coupled with the reduction in bank reserve requirements and the wider range of assets that will be accepted as collateral makes it much less likely that a major financial institution will run out of money in the very near future.
Phew.
But as I also said in that post last week, the new lending to banks does not solve the deeper problems at the heart of the crisis of the eurozone. Quite the opposite: it's a reflection of how far governments are from a lasting solution.
The sheer volume of lending today, 489bn euros ($638bn; £407bn) to a total of 500 banks, may also tell us quite how tight the funding situation had become, though the generous terms of the facility surely made it attractive to healthy banks as well.
Will this money find its way, as President Sarkozy has suggested, into the troubled sovereign debt market?
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