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ECB backs off from emergency lending

Stephen Beard Dec 3, 2009
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ECB backs off from emergency lending

Stephen Beard Dec 3, 2009
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TEXT OF STORY

Bill Radke: Also sorting out its banking mess now is Europe, and today the European Central Bank began the process of withdrawing some of its support for banks there. Marketplace’s Stephen Beard looks at the potential benefits and risks.


Stephen Beard: The ECB has pumped large amounts of cash into its banking system. The effort proved effective. It helped save the system from collapse. But today the bank said it’s scaling back their special-lending program. It believes there is now enough liquidity around.

Eric Mather runs the European Policy Forum. He says the recovery is gathering pace. ECB officials are now fretting about inflation.

ERIC MATHER: They aren’t going to take any risks with inflation and they would rather start the tightening now than risk things getting out of control later in 2010.

But today’s measure is only a gentle tightening, with good reasoning according to Standard & Poor’s. The ratings agency spots another threat on the horizon. It says that as central banks withdraw their emergency support next year, European companies could face a a severe shortage of cash, to the tune of $1.5 trillion.

In London this is Stephen Beard for Marketplace.

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