“WASHINGTON�(CNNMoney) — The European Central Bank has pulled out all the stops over the past few months to prevent a credit crunch by providing banks with €1 trillion in ultra-low cost financing.
That €1 trillion move, which was hailed as a game changer, helped ease pressure on eurozone nations as some banks used the money to buy government bonds.
But the potency of the ECB’s two long-term refinancing operations, or LTROs, appears to be fading as yields on Spanish and Italian bonds have shot higher in recent weeks.
ECB president Mario Draghi has said the goal is to support the economy by helping banks that have been struggling to fund themselves amid concerns about exposure to sovereign debt. He has called on eurozone officials to take advantage of improved market conditions to push ahead with fiscal consolidation and structural reforms aimed at increasing economic competitiveness.
Still, the renewed tensions have raised speculation that the ECB could resume its controversial purchases of government bonds.
Robert Zoellick, the outgoing president of the World Bank, said Thursday that the ECB’s “extraordinary actions” were appropriate, although he suggested that more may need to be done.
“We are now in a phase where, after the ECB provided very attractive financial resources to a number of the banks to be able to buy government debt…they are about at the end of that point and limit, so I think further actions are going to be called for,” said Zoellick….”
If you enjoy the content at iBankCoin, please follow us on Twitter
