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This article was published on 19 September 2014 at 09:44.
The last change is the 19 September 2014 at 09:45.
FRANKFURT – has remained largely below the expected demand for liquidity from the banks of ‘Eurozone in the first auction of the European Central Bank to provide funds to pay costs close to zero for the real economy. The auctions are part of a plan the ECB to prevent the euro area slipping into deflation and worsen the prospects for growth and employment: the current inflation of 0.4% is very far from the objective of staying below, but close 2%.
A total of 255 banks got yesterday of € 82.6 billion, against expectations of financial markets at least 100 billion. The first bank to declare the amount requested was UniCredit, which said it had obtained 7.7 billion euro. In general, the higher demand should come from Italian banks (which in the first round they got 23 billion euro, more than a quarter of the total) and Spanish, although the latter would have remained yesterday far below expectations, with 14 billion euro, according to industry estimates. Many other banks, like those in Germany, have ample liquidity, as well as their customers, and can therefore be expected to participate in a modest extent the operations of the ECB, which does not publish a breakdown of allocations by country. French banks would in turn submitted requests granted them far below the roof (each bank can take up to 7% of its portfolio of loans to businesses and households.)
In the first two steps (the results of the next will be announced on 11 December), the banks have the opportunity to take up to 400 billion euro. All’Eurotower are likely to wait for the auction in December, when they believe that the demand will be higher, before giving an overall assessment, as pointed out by Peter Praet, a member of the executive committee, told Reuters. The low level of requests in this first operation, however, raise some doubts on the effectiveness of the plan and “will probably lead the ECB to step up efforts to increase its budget surplus in the short term,” according to Joseph Maraffino, of Barclays Capital.
The loans with liquidity operations, such Tltro are 4 years old at the fixed annual rate of 0.15% (0.05% of the refinancing rate plus a spread of 10 basis points). According to several analysts of the banking sector, many institutions have preferred to wait for the auction in December, when the results have been further clarified the examination conducted by the ECB itself on bank balance sheets (in publication at the end of October) and when there will be some indication of the program purchases of securities (Abs) and covered bonds by Eurotower, which in turn will start next month. The ECB will realize then six more auctions in 2015 and 2016, for a total of one million euro, in different ways, by encouraging banks who have increased the credit. If you will not use the funds received through loans to the real economy (with the exception of Immobiliare) banks must return them to the ECB after two years.
The Tltro and purchases of securities are part of a plan announced in June by the President of the Central Bank Mario Draghi to try to combat the risk of deflation and revive the stagnant economy of the Eurozone through better conditions for credit. The result of the very low first auction raises some doubt about the possibility that the ECB will achieve its aim of bringing its assets to the levels of 2012, as Draghi said: this would be an increase of approximately one million euro, compared to the current 2 thousand billion.
The next event for the markets is communication today by the ECB repayments of bank funds from the previous three-year liquidity injections, carried out between the end of 2011: in this way you will find out how much the application of the first Tltro is new and how much cash is used to repay old loans. Unlike then, however, the banks are not particularly short of cash. The risk, according to Lena Komileva, G + Economics, which is the result of yesterday’s disappointing to have an impact on trust. It is clear, according to Komileva, that the quantitative effects of the ECB are more than offset by weak demand in the Eurozone, structural rigidities and external geopolitical risks. If the plan announced by Draghi will not give the desired result, says the economist, the ECB will once again under pressure at the beginning of 2015 it will also buy government bonds.
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