European banks borrow less than expected
Yesterday saw a significant fall in European stock markets as concern about maturing ECB loans to EU banks began to grow. There were concerns that European banks would look to borrow in the region of EUR200 billion this morning after the closure of the ECB emergency liquidity program but in reality the figure was just over EUR130 billion. Many in the market have breathed a sigh of relief although there are still concerns about the state of European money markets and interbank lending.
Whether or not a number of European banks have held back any potential loan requests from the ECB remains to be seen but there is no doubt that today has not been anywhere near as bad as the pessimists had predicted. It will be interesting to see how European Bank lending improves, or changes, in the weeks and months ahead because there is a need for genuine liquidity to return to the marketplace as soon as possible.
Without genuine liquidity in the European marketplace the European economy as a whole will struggle to strengthen and this could have a knock on effect to countries such as the UK. Despite the fact that the credit crunch initially hit worldwide money markets more than two years ago the tremors are still being felt in many places.
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