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European Central Bank Loans

Dáil Éireann Debate, Wednesday - 23 May 2012

Wednesday, 23 May 2012

Ceisteanna (13)

Clare Daly

Ceist:

11 Deputy Clare Daly asked the Minister for Finance noting that the ECB has provided more than €1,000 billion to European banks at 1% for three years, his views on whether this resource would be more productively used as part of a stimulus programme of necessary public works throughout the EU to enable the unemployed to work again and to thereby kick-start economies throughout the EU. [19800/12]

Amharc ar fhreagra

Freagraí scríofa

The sizeable expansion in the ECB's balance sheet since this crisis began which manifested itself most recently in the two three year repos exercises, are all designed to stabilise the European banking sector and ensure institutions across the Eurozone are in a position to continue lending into the economy.

As a point of clarification, the €1 trillion of lending you refer to was the gross amount of loans issued in the two recent three year operations. After refinancing, the net increase in the ECB's balance sheet was less than this. Having said that they helped contribute to an increase in liquidity provided by the ECB of nearly €600 billion between November and April. It is impossible to directly measure the impact of these measures on lending and economic activity, as there is no counterfactual. However what we do know is that conditions would be considerably worse in the absence of these interventions by the ECB. As the Deputy may be aware, the ECB cannot lend directly to sovereign governments, it can only lend to licensed credit institutions with MFI (monetary financial institutions) status in exchange for appropriate collateral.

Governments across the Eurozone can of course raise funding on the international markets from investors who may include banks who are supported by the ECB, or funds/institutions who have borrowed from those same banks. It is a decision for individual governments whether or not to stimulate their own economies through public works projects taking into account factors such as cost and availability of funds, debt sustainability and traditional cost/benefit analysis.

The government is supportive of the growing calls across the Eurozone for a growth and stimulus agenda which is why we strongly argued — and secured agreement — that within our own funding programme we be allowed use a greater portion of funds derived from state asset disposals for such purposes.

Question No. 12 answered with Question No. 7.
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