ECB's bank loans 'are working'

29 December 2011

The European Central Bank's (ECB's) attempts to ease the debt crisis in Europe by offering banks in the area loans with unlimited funds for three appear to be showing positive signs.

Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, noted the approach is offering a degree of respite for Italy and the arrears it is suffering with, Bloomberg reports.

However, the industry figure - who has also reported on Central European affairs for The Economist and has written for the Financial Times - suggested more may need to be done, because while "the ECB's new three-year liquidity measures have provided a fillip to Italy’s short-term debt market, they do little to address underlying concerns about creditworthiness".

He added market pressure is unlikely to abate, but described the country's auctioning off of €7.02 billion (£5.87 billion) of bonds - which fell short of the original target - as not a bad result, given that the yield on the three-year note tumbled significantly.

By Claire Archer

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