long-term refinancing operation

Ralph Atkins

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.  Read more