EU President Barroso proclaimed this morning that Europe is "through the worst of the crisis" and yet the ECB's policy transmission channels are so fragmented - and the economies of the disparate union so in need to help - that Draghi and his fellow planners are re-discussing ways to directly lower the interest-rate burden for small-to-medium-sized businesses (SMEs). Germany's Die Zeit reports that the concept of the ECB lowering its standards once again to accept SME loans as collateral for lending to its member banks since, as we noted here, the ECB is basically impotent with regard juicing anything in the real economy. So the ECB is willing to step in and sacrifice its balance sheet (and the taxpayers of Europe - Germany - that implicitly backstop it) to ensure SMEs get funded at sub-market rates that banks are unwilling to accept on a risk-adjusted basis? What could possibly go wrong?
The European Central Bank is considering ways to lower the interest rate burden for small-to-medium sized businesses in the Eurozone's struggling periphery, German weekly Die Zeit reported Wednesday.
Among the options being considered is accepting some SME loans as collateral for banks to participate in ECB operations, the paper reported.
It remains unclear whether any measures will already be taken during Thursday's monthly rate-setting meeting of the ECB Governing Council.
The central bank has repeatedly expressed concern that EMU financial markets remain fragmented and monetary transmission channels broken. ECB President Mario Draghi has noted that even solid SMEs based in peripheral nations are struggling to gain access to cheap credit, despite record low interest rates.