While the LTRO was heralded as a success for a month or so with the implicit money-printing-and-sovereign-reacharounds involved at the cost of senior unsecured bondholders, the sad reality is that not only are the effects of LTRO now almost entirely gone in both sovereign and financial funding costs but the massive 'injection' of freshly printed encumbrance did nothing for the real economy. In fact, as Barclays notes in these charts from the ECB bank lending survey, not only is demand weaker for credit (i.e. the consumer is pulling back in classic balance sheet recessionary style) but the banks themselves are tightening credit conditions (reducing supply) - the exact opposite of what the ECB had in mind. There is one exception to this vicious cycle - German real estate loan demand picked up modestly - we assume reflecting their flat housing market for the last 15 years and extremely low rates). Oh well, we are sure the next ECB action will be different in its banking reaction.
Credit conditions, for enterprises and during the past three months, continued to tighten appreciably in Cyprus, Italy and Portugal. Weakness in demand for enterprise loans was quite broadly based in April, in Austria, Cyprus, Germany, Spain, the Netherlands and especially Italy (-38% net diffusion balance). As well, weakness in demand for housing loans was also apparent in Austria, Cyprus, Spain, and particularly in Italy (-44%), the Netherlands (-42%) and Portugal (-70%)
Demand is dropping rapidly for Euro (ex Germany)...
[14]
and Supply is contracting too for Euro (ex Germany)...
[15]
Yet more gaping differences between the German cycle and the rest of Europe.