ECB chief Mario Draghi held his monthly news conference today and re-iterated he is not changing anything. Interest rates on ECB lending would remain at 1 percent. The bank plans to make further three year loans available for euro zone retail banks starting next month.
The first tranche of three year loans was made available just before Christmas. Almost half a trillion euros was borrowed by around 500 banks. Since then almost as much money has been deposited every night at the ECB leading critics to say the banks were borrowing the money but not getting it out in to the general economy by lending to businesses or buying euro zone nations' sovereign debt.
Draghi told the press conference that the program was working.
"Our nonstandard policy measures are providing a substantial contribution to improving the funding situation of banks, thereby supporting financing conditions and confidence,” Draghi.
Critics have pointed out that even as money has been loaned out, record amounts have been placed on deposit at the ECB. The assumption is that banks who borrowed money cheaply were still not getting it into circulation. Draghi said the money being deposited came from banks other than those which had taken up the three year loans.
To underscore Draghi's point, Spain and Italy, the big euro zone economies that face serious debt issues, held successful sales of ten year bonds today. The assumption would be that some of their bonds were purchased by banks with money borrowed from the ECB for three years. Interest rates for Italian debt dropped to 6.58 percent, Spain's fell to 5.18 percent.
The euro gained on currency markets behind Draghi's comments and the bond sales. Full report here.