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Summary of Ecb Actions to Combat Euro Crisis

In: Business and Management

Submitted By amoeba
Words 398
Pages 2
While not exhaustive, below is a list of the ECB’s most substantive actions to combat the crisis in chronological order.
LTRO (Long Term Refinancing Operations) – December 2011
Essentially the ECB lending money to banks at very low interest rates. Used throughout the crisis dating back to March 2008, but in Dec 2011 the ECB announced LTRO with a three year term with and a 1% interest rate.
SMP (Securities Market Program) – May 2010
ECB program under which it would intervene in bond markets and purchase sovereign debt, that it would typically accept as collateral, on the secondary market from banks at market prices.
EFSM (European Financial Stabilization Mechanism) – May 2010
Emergency funding program, backed by all 27 members of the EU, that allows the European Commission to borrow up to 60bn euros in the financial markets, using the budget of the EU as collateral.
EFSF (European Financial Stability Facility) – June 2010
Financing vehicle established to collect funds from member states, and in conjunction with the IMF cover financing needs of stressed member state, subject to strict policy conditionality. Euro area Member States will provide guarantees for EFSF issuance up to a total of € 440 billion.
Draghi’s Pledge – July 26, 2012
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough". Draghi’s equivalent of Paulson’s bazooka. Proved to be one of the more effective actions the ECB has taken. Stock markets in Germany, France, Italy & Spain have rallied from 22% to 38%. The month prior to his pledge the euro had averaged $1.2341. Euro has rallied against 14 of it’s 16 most traded peers, and now trades at $1.3126.
OMT (Outright Monetary Transactions) – September 2012
Essentially replaced SMP, which was terminated in September, 2012. Expected to be more effective for four...

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