Draghi’s Trillion-Euro Journey is Under Way

The European Central Bank will announce the result of its first targeted lending program today as part of its effort to stave off deflation in the euro area. The so-called TLTRO is among a package of measures that the ECB’s president says will boost its balance sheet to as much as 3 trillion euros ($3.9 trillion) from 2 trillion euros.

Draghi’s first step may not take him very far, with estimates for today’s offer, which is linked to the size of banks’ loans to the real economy, ranging from 100 billion euros to 300 billion euros. That’ll shift the focus to later programs including the next operation in December and still-undefined plans to buy privately owned assets, and ultimately perhaps to purchases of government bonds.

A relatively low take-up “is likely to raise further questions over the feasibility of the ECB’s goal,” said Martin Van Vliet, senior economist at ING Groep NV in Amsterdam. “While we agree that the ECB will likely struggle to meet this goal, we would suggest to wait until after the December TLTRO before drawing strong conclusions.”


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