European Banks Tap Central Bank for More Loans

Posted February 29th, 2012 at 9:50 am (UTC-5)
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The European Central Bank has handed out another $712 billion in loans to 800 banks throughout the continent in a new effort to boost Europe’s economy and help it recover from the governmental debt crisis.

The three-year loans the central bank issued Wednesday carry a very low 1 percent interest rate. The central bank is hoping that the new loans, on top of $657 billion it approved in December, will make it easier for Europe’s private banks to ease their cash shortages as well as make new loans to businesses and individuals.

With several debt-ridden countries in the 17-nation euro currency bloc adopting austerity measures, the European Union says the eurozone economy will dip into a mild recession this year. But with banks having more money to lend, the continent’s economy could get a needed jolt.

European workers staged new protests in several cities Wednesday against the austerity measures, saying they are unfairly bearing the brunt of wage and pension cuts and reduced spending for social programs. Greek union workers walked off their jobs, mobilizing in Athens just hours after the Greek parliament sharply trimmed wages and pensions to meet the demands of the country’s international creditors.

But one European union leader, Bernadette Segol, said the continent cannot become competitive merely by cutting wages.

“The competitiveness of Europe won’t come from a decrease in the salaries. The competitiveness of Europe comes from innovation, research, training. We won’t be competitive because we have Chinese salaries. We will be competitive because of how we will produce, because of our choice of industrial policy, because of our system of education and training.”

Greece has been forced to adopt budget cuts in exchange for securing a new $175 billion international bailout and having private creditors cut more than half of the debt it owes them — a $144 billion reduction.

Greek Finance Minister Evangelos Venizelos called the pension cuts a dramatic move. But he said parliament must urgently approve the entire package of cuts before a Thursday eurozone finance ministers’ meeting. He said Greece has to show its credibility to the continent’s finance chiefs.