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By Yannick Van hoorickx, Business Consultant at Sia Conseil
As a reaction to the ongoing credit crisis in the Eurozone, the ECB, headed by Mario Draghi, launched a first round of non-standard long term refinancing operations (LTROs) in December 2011 and a second round in March 2012 to provide liquidity to its member banks and alleviate pressure on the re- financing rates of some peripheral Eurozone governments (Italy, Spain, Greece, Portugal). While there were some initial positive effects on government bond yields in the Eurozone periphery, Spanish yields rose above pre-LTRO levels in April 2012 and Spanish bank Bankia requested a EUR 19 billion bailout in May 2012, indicating that more efforts are needed to safeguard the euro-system.
The mechanism...
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