At the ECB, the Tweak that Quietly Saved the Banking System

http://www.nytimes.com/2012/02/27/business/global/27iht-ecb27.html?pagewanted=2&hp#

The European Union has, as we know, been struggling to maintain its economic prominence during the recession. The globalized nature of policy has created a so called “domino affect” through which large and small Euro Zone countries have been tied together. When one country has problems in its economy, it has relied on EU institutions – notably the European Central Bank (ECB) – to provide loans to banks, in order to stimulate the economy.  ECB changed its policy in November by allowing 3 year loans (three times more than previously) at a 1% interest rate. These loans were made available for a time in December and will become available once more this week. This decision was made as a compromise of how this institution should deal with the debt crisis. While the intent is to increase economic vitality, the ECB does not know what the exact response from banks will be.  Earlier this year, 489 billion Euros were borrowed from a variety of banks across the Euro Zone. If banks utilize this money effectively, these loans could be the right start for resolving the crisis.