Just how big a difference did European Central Bank action make after the collapse of Lehman Brothers in 2008?
ECB researchers have come up with some new, flattering numbers on the economic impact of the ECB’s decision to offer unlimited liquidity to eurozone banks. That step – taken under Jean-Claude Trichet, then ECB president – foreshadowed the decision in December by Mario Draghi, his successor, to extend the maximum loan term from one to three years.
The authors’ key conclusion, in a discussion paper from the London-based Centre for Economic Policy Research, is that eurozone industrial production two years after Lehman Brothers was 2 per cent higher than would otherwise have been the case and unemployment about 0.6 per cent lower.
By Claire Jones and Norma Cohen
The final batch of data for Project Merlin, the government’s flagship agreement with Britain’s biggest banks to encourage business lending and appease public anger over the financial crisis, show the banks missed their target for lending to small and medium-sized companies.
The data, out today, revealed lending to SMEs for 2011 fell just over a billion short of the £76bn target set by Project Merlin, which the government will not renew this year.
That the government’s target was not met is disappointing. But a shortfall of less than 2 per cent is hardly disastrous.
However, Bank of England data suggest lending conditions for SMEs are far worse than the Merlin data show. Both in terms of the supply of credit and the cost of borrowing.