FRANKFURT, Germany (AP) – The European Central Bank has launched a new stimulus program aimed at getting banks to lend more – but low demand for its super-cheap money shows the difficulty it faces in trying to revive a stalling economy.
The central bank for the 18-country eurozone on Thursday handed out 82.6 billion euros ($107 billion) in ultra-low interest loans to 255 banks.
Demand undershot even the low end of expectations. Analyst estimates had varied, from around 100 billion euros to over 200 billion euros.
The idea is to have banks use the easy money as an incentive to lend more to companies. Banks pay only 0.15 percent annual interest for up to four years for the loans. The amount they can borrow is tied to how much they loan to companies. That is intended to make sure the stimulus money gets into the economy and creates jobs; banks have used previous such offerings to load up on government bonds instead.
The low uptake underlined the ECB’s difficulty in getting its stimulus measure through to the larger economy. Many economists think the impact of the cheap loans – dubbed targeted longer-term refinancing operations, or TLTROs, pronounced “TELL-troes” – will have limited impact because companies see no reason to risk borrowing in such a slack economy.