Three-year tender, longer-term refinancing operation (LTRO)

Money made available by the ECB in December 2011 and February 2012 to banks for three years – before that the maximum duration was only one year – as part of quantitative easing, with the officially announced intention of avoiding a credit crunch (the LTRO was credited with having relaxed the pressure on eurozone bank funding at a time when liquidity for some banks looked threatened: it should also reopen commercial funding markets). More than EUR 900 billion was drawn down; and financial journalists reported that a good part of this sum went into the purchase of government bonds by the institutions. In this way, the ECB itself did not have to buy more government bonds, as it did on the basis of a majority decision in the Governing Council. Many saw this as the actual intention of this temporally unusual measure: namely, the indirect financing of government debt by the central bank. This, as financial history teaches, is considered a straight path to inflation. – See fear, perverse, purchases, central bank, bubble, speculative, carry trades, ECB sin, financial, crisis, money, cheap, crisis, central bank-induced, avoidability, credit support, extended, full allocation. – ECB Monthly Bulletin, January 2012, p. ECB Monthly Bulletin, January 2012, p. 32 et seq. (justification of three-year operations; statistical; no indication that this at least encourages indirect government financing).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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