This isn’t the backstop the market was hoping for, but it’s an important development nonetheless. Despite the ECB’s anti-sovereign debt buying rhetoric, providing record liquidity to Euro area banks demonstrates its commitment to solving the crisis. Whether banks use the funds to buy up higher yielding sovereign debt remains to be seen, but at least the ECB is getting more involved.
Hundreds of euro-zone lenders took out a total of €489.19 billion ($639.96 billion) in low-interest loans from the European Central Bank on Wednesday, as the currency area extended a massive financial lifeline to its struggling banking industry. The ECB said 523 banks borrowed under the central bank’s newly activated three-year lending facility, which has been dormant since the summer of 2009. The unexpectedly heavy demand for the loans highlighted the severity of the funding crisis, but simultaneously stirred hopes that the rescue will help defuse Europe’s two-year financial crisis – or at least prevent it from getting worse.
Read more in the Wall Street Journal.