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You can find the current article at its original source at http://www.guardian.co.uk/business/2012/feb/29/eurozone-debt-crisis-ecb-loans-ltro
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| Eurozone crisis live: ECB to launch massive cash injection | Eurozone crisis live: ECB to launch massive cash injection |
| (40 minutes later) | |
| 9.26am: More protests are expected in Greece today, after new austerity measures were approved last night. | |
| A three-hour stoppage has been called from 12 to 3pm (local time, I believe), which could disrupt services at tax offices and other public agencies. | |
| There's particular anger that the Athens cabinet formally agreed to make deep cuts to the minimum wage, which will be backdated to February 14. | |
| Not the best Valentine's Day present, as Yiannis Mouzakis pointed out on Twitter: | |
| And belated Valentine's present from the #Greece gov to the people, new min wage reductions effective from Feb 14th | |
| — Yiannis Mouzakis (@YiannisMouzakis) February 29, 2012 | |
| The Greek parliament also approved new cuts in public sector pensions and government spending. This, like the minimum wage cuts, is the price of Greece's second rescue package. | |
| 9.10am: Just in – the German unemployment rate has risen this month. | |
| The number of people out of work rose to 3.109m in February, from 3.084m in January. That puts the Germany unemployment rate at 7.4%, up from 7.3% (although if you strip out seasonal factors, it comes in at 6.8%, as in January). | |
| But the German statistics body also revealed today that the number of people in employment came in at 41.063 million, the first time that the workforce has been recorded above 41m in a January. | |
| The Federal Statistics Office said: | |
| The positive development in the labour market continued at the beginning of 2012. | |
| 9.01am: In the reader comments, Sharkfinn asks three questions, which I'll have a stab at answering: | |
| Who is ultimately receiving this money? That depends on the individual banks - they can use this new liquidity in various ways. One sensible policy would be to take your loan at 1% and buy a higher-yielding bond for a guaranteed profit (unless you pick a country or corpration that defaults. Nicolas Sarkozy actually said banks should do the patriotic thing and purchase sovereign debt with their LTRO funding. Another option would be to increase lending to small businesses and individuals. Some of last December's LTRO was used to pay off existing loans from the ECB. | |
| Who is ultimately paying/financing these loans? That's still the ECB, which adds the new loans to its balance sheet. | |
| Will these loans be repaid and who has to fork out if they don't? The banks have to hand over 'collateral' to the ECB in exchange for the loans. That collateral would be decent quality assets such as sovereign debt (ahem) or mortgage securities (ahem again). If a bank defaults on its LTRO obligations then the ECB would keep the collateral. Ultimately, the ECB is supported by the members of the eurozone, who have put up capital to back it. | |
| 8.48am:Is anyone prepared to stick their necks out and predict how large today's LTRO will be? City predictions range from €300bn to €1trn. | |
| You're playing for the glory and admiration of your peers. Might also be able to russle up a small prize - perhaps one of the books about the financial crisis that litter my desk..... | |
| For the record, I'm going for €600bn. | |
| 8.37am: We've seen disappointing GDP data from Sweden and India this morning, but for different reasons. | |
| The Swedish economy shrank by 1.1% in the last three months of 2011, on a quarterly basis according to data just released. That's more than analysts had expected. Sweden's stats office also slashed the growth recorded in the third quarter of last year to just +0.9%, from 1.6% previously. | The Swedish economy shrank by 1.1% in the last three months of 2011, on a quarterly basis according to data just released. That's more than analysts had expected. Sweden's stats office also slashed the growth recorded in the third quarter of last year to just +0.9%, from 1.6% previously. |
| It means that Sweden grew by 3.9% during 2011. Even though it's not a member of the euro, its economy has suffered the impact of the euro crisis. Industrial production, business confidence and consumer spending have all been hit. | |
| Earlier, India reported growth of 6.1% in the final quarter of 2011, on a year-on-year basis. That's the weakest growth in nearly three years. It was blamed on a slowdown in the manufacturing sector (which has suffered from rising raw material costs and high borrowing costs, with interest rates currently at 8.5%) | Earlier, India reported growth of 6.1% in the final quarter of 2011, on a year-on-year basis. That's the weakest growth in nearly three years. It was blamed on a slowdown in the manufacturing sector (which has suffered from rising raw material costs and high borrowing costs, with interest rates currently at 8.5%) |
| India is now expected to grow by 7% in the current financial year. | |
| 8.18am: So why is the European Central Bank prepared to offer hundreds of billions of euros to the banking sector? Well, as my colleague Ian Traynor explains here, the ECB is hoping to: | 8.18am: So why is the European Central Bank prepared to offer hundreds of billions of euros to the banking sector? Well, as my colleague Ian Traynor explains here, the ECB is hoping to: |
| stabilise the euro, forestall a new credit crunch and shore up troubled banks. | stabilise the euro, forestall a new credit crunch and shore up troubled banks. |
| Loans agreed under the Long Term Refinancing Operation will be made on a three-year basis, at an interest rate of just 1%. Because there is no official upper limit to the amount offered under LTRO, there's a lot of interest in how much is taken up. | Loans agreed under the Long Term Refinancing Operation will be made on a three-year basis, at an interest rate of just 1%. Because there is no official upper limit to the amount offered under LTRO, there's a lot of interest in how much is taken up. |
| Last time the ECB did this, three months ago, Mario Draghi handed out almost half a trillion euros – much more than expected. The influx of liquidity has been credited with rescuing Europe from another credit crunch. But, as Ian points out, the LTRO has its critics: | Last time the ECB did this, three months ago, Mario Draghi handed out almost half a trillion euros – much more than expected. The influx of liquidity has been credited with rescuing Europe from another credit crunch. But, as Ian points out, the LTRO has its critics: |
| The cheap money has overwhelmingly flowed to the eurozone's weakest corners, feeding a grumbling campaign that is getting louder in the northern, more disciplined creditor countries. | The cheap money has overwhelmingly flowed to the eurozone's weakest corners, feeding a grumbling campaign that is getting louder in the northern, more disciplined creditor countries. |
| Of the €489bn taken up in December, €325bn was tapped by banks in Greece, Ireland, Italy and Spain. | Of the €489bn taken up in December, €325bn was tapped by banks in Greece, Ireland, Italy and Spain. |
| There are also complaints that the LTRO is just a disguised version of quantitative easing. The ECB may not be buying government bonds itself, but it knows very well that much of the cheap loans will be used to buy up peripheral sovereign debt. | There are also complaints that the LTRO is just a disguised version of quantitative easing. The ECB may not be buying government bonds itself, but it knows very well that much of the cheap loans will be used to buy up peripheral sovereign debt. |
| LTRO's aren't a new invention, but the ECB has changed the rules by offering the loans over such a long timeframe (rather than the 3 or 6 months that were more common in the past). | LTRO's aren't a new invention, but the ECB has changed the rules by offering the loans over such a long timeframe (rather than the 3 or 6 months that were more common in the past). |
| 8.07am: Most of today's action should come in the next few hours. The ECB's loans will dominate the headline, but policymakers and central bankers will be busy, on both sides of the Atlantic. | 8.07am: Most of today's action should come in the next few hours. The ECB's loans will dominate the headline, but policymakers and central bankers will be busy, on both sides of the Atlantic. |
| Here's the agenda: | Here's the agenda: |
| • UK Treasury Committee hearing on the Bank of England inflation report - 9.45am • European Central Bank announces LTRO details - 10.15am GMT • The Netherlands parliament votes on Greek aid package – from 11am GMT • Finnish parliament votes on Greek aid package – from noon GMT • Federal Reserve chair Ben Bernanke testifies to Congressional Financial Services Committee - 3pm GMT | • UK Treasury Committee hearing on the Bank of England inflation report - 9.45am • European Central Bank announces LTRO details - 10.15am GMT • The Netherlands parliament votes on Greek aid package – from 11am GMT • Finnish parliament votes on Greek aid package – from noon GMT • Federal Reserve chair Ben Bernanke testifies to Congressional Financial Services Committee - 3pm GMT |
| 8.01am: Good morning, and welcome to our rolling coverage of the European debt crisis. | 8.01am: Good morning, and welcome to our rolling coverage of the European debt crisis. |
| And what a lively day we have ahead. The European Central Bank is about to pump hundreds of billions of euros into the financial system through cheap loans to the regions banks. Today's Long Term Refinancing Operation (LTRO) is unlimited, and City investors and analysts are on tenterhooks to see quite how much money the bankers ask for. | And what a lively day we have ahead. The European Central Bank is about to pump hundreds of billions of euros into the financial system through cheap loans to the regions banks. Today's Long Term Refinancing Operation (LTRO) is unlimited, and City investors and analysts are on tenterhooks to see quite how much money the bankers ask for. |
| Two more European parliaments will vote on Greece's new financial package. Having cleared the Bundestag on Monday, the programme will now be considered by Finland and the Netherlands. | Two more European parliaments will vote on Greece's new financial package. Having cleared the Bundestag on Monday, the programme will now be considered by Finland and the Netherlands. |
| And in London, senior members of the Bank of England will be quizzed by MPs. Expect the eurozone crisis to come up. | And in London, senior members of the Bank of England will be quizzed by MPs. Expect the eurozone crisis to come up. |
| We'll also be monitoring events in Ireland, after yesterday's news that a referendum will be held on the EU fiscal compact. | We'll also be monitoring events in Ireland, after yesterday's news that a referendum will be held on the EU fiscal compact. |