- European Central Bank Discusses Analysis of Financial Conditions and Current Measures to Support the Banking System
- December 14, 2009
- Law Firm: Alston & Bird LLP - Atlanta Office
Yesterday, the Governing Council of the European Central Bank (ECB) released its current economic and monetary analysis and discussed the future of its financial support measures for the “euro area” banking system.
With respect to the ECB’s existing support of the banking system, ECB President, Jean-Claude Trichet, and Vice President, Lucas Papademos, stated that “[w]e will continue our enhanced credit support to the banking system, while taking into account the ongoing improvement in financial market conditions and avoiding distortions associated with maintaining non-standard measures for too long.” Although not currently ready to end the measures, Trichet and Papademos indicated that the ECB will eventually remove its current level of support, stating that “[l]ooking ahead, the Governing Council will gradually phase out, at the appropriate time, the extraordinary liquidity measures that are not needed to the same extent as in the past.”
The Governing Council also announced that it will “continue conducting [its] main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as is needed ¿ and at least until the third maintenance period of 2010 ends on [April 13th].” The Governing Council also will not adjust the “key ECB interest rates” at this time, stating that “the current rates remain appropriate.”
With respect to the current state of the “euro area” economy, Trichet and Papademos acknowledged some improvements, noting that the “euro area real GDP growth [returned] to positive territory in the third quarter of 2009,” but also remained cautious about the future, stating that “[t]he Governing Council expects the euro area economy to grow at a moderate pace in 2010, recognising that the recovery process is likely to be uneven and that the outlook remains subject to high uncertainty.”