Eurozone governments face disappointment over their hopes that the region’s banks would use new longer-term finance offered by the European Central Bank to buy up beleaguered sovereign bonds.
Bankers say big European banks are unlikely to buy more government debt using the three-year loans, which will be available from the ECB for the first time next week.
The ECB announced this month that it would offer three-year loans to the region’s banks in an effort to provide a lifeline to lenders locked out of public funding markets. About half of the €614bn worth of longer-term loans, last offered by the ECB back in 2009 with a one-year term, is estimated to have been used to buy sovereign debt, mostly from peripheral eurozone countries such as Greece and Spain.