European leaders have been criticized for failing to take meaningful action to address the region's debt crisis. However, the European Central Bank’s decision to lend to banks is being applauded by many who had predicted doom, including euro bear Carl Weinberg, chief economist at High Frequency Economics.
Weinberg consistently warned that the sovereign debt woes facing Europe would lead to a banking crisis and depression, CNBC reported. But following Wednesday's long term refinancing operation by the European Central Bank (ECB), Weinberg believes the eurozone and its banking industry finally have something to celebrate.
Yahoo’s The Daily Ticker reported that the ECB kicked off its new borrowing facility with a bang Wednesday, lending $645 billion to 523 banks at 1 percent for up to 3 years. Both the dollar volume of loans and the number of banks seeking funds exceeded expectations.
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According to Bloomberg, the banks borrowed enough cash to refinance almost two-thirds of the debt they have maturing next year amid concerns that markets will remain frozen.
“Something good finally happened in Euroland,” CNBC quoted Weinberg as writing in a research note.
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(Associated Press photo)
This may not be enough in the end, but it is a significant step in the right direction, he added.
The injection of liquidity converted a bear into an optimist. And, according to Forbes.com, the news gave European stocks, especially financials, and the euro a boost. But not everyone agrees that it is time to break out the champagne.
Skeptics said the high level of demand for loans is a sign of how desperate European banks are for financing, says the Daily Ticker.
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