The crisis is changing everything. Asking for money is no longer a defect, and it is virtuous to give, not to deny. Yesterday the European Central Bank (ECB) conducted a deal that has no precedent in the history of the Eurozone. European banks asked for 529.5 billion euros from the ECB, who has agreed to provide them all the money that the need since 2008, fully attended to their needs this time and loaned them the money on a three-year term at an attractive interest rate of around one percent. The ECB, led by Mario Draghi, has never done a deal this large in volume. This past December 21, the date on which it issued the first of two three-year loans to the banks, it pumped 489.2 billion into the financial markets.
The amount issued yesterday enabled most of the banks to resort to a second round of "open bar" liquidity provided by the ECB. Two months ago 523 banks asked the ECB for funding, and this time 800 of them did so. "Many more banks participated than in December, possibly thanks to the reduction of collateral requirements that banks are required to have in order to borrow money," explains Marie Diron from Ernst & Young Eurozone Forecast (EEF).
Spain is among countries benefiting from the ECB's more lax policy, because it was one of seven nations (along with France, Italy, Austria, Ireland, Portugal and Cyprus) to enjoy special conditions so that their banks could access the funding. As a result, a fifth of the total funding started and will end up in Spain, because sources from the markets assure that, collectively, Spanish banks asked for between 100 and 110 billion euros. This is more than the 80 billion euros they asked for in December. Italy is adding to that amount, because they are experiencing their own problems, and combined with Spain the two countries could corner nearly half of the 529.5 billion euros that the ECB will offer.
