Eurozone QE more likely as banks decline offer of cheap funds from Super Mario

Tim Wallace
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EUROPE’S banks borrowed less than expected from the European Central Bank (ECB) yesterday, scotching boss Mario Draghi’s hopes that the offer of funds would help boost lending and so aid the economy.

Instead, he may have to launch a fully fledged quantitative easing (QE) scheme to buy government debt.

The 255 participating lenders took a total of just €82.6bn (£65bn) from the targeted longer-term refinancing operation (TLTRO), well below the €130bn or more that economists had predicted.

But markets jumped and the euro weakened on the poor results of the TLTRO, as it is now more likely the ECB would resort to broader tools – including the full-scale QE which it has avoided so far.

It made €400bn available over the two TLTRO windows, one yesterday and one in December.

But the unexpectedly low take-up means the programme may have too small an effect, and so the ECB could be pushed into a formal QE scheme.

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