The European Central Bank's president, Jean-Claude Trichet, did the minimum necessary to prevent a further deepening of the crisis in the eurozone, cancelling plans to withdraw some of the support the ECB has been providing to banks and European governments. After some initial slippage yesterday, with some traders disappointed that the ECB had not gone further, the euro strengthened on the news.
Speaking at the ECB's regular meeting to set interest rates, which stay at 1 per cent, Mr Trichet said the ECB would continue to offer unlimited liquidity to banks until at least 12 April. As part of a gradual move to "normalise" monetary policy, the ECB was due to phase out these arrangements early next year. Fears that they were indeed going to be ended had contributed to the recent crisis, as eurozone governments were faced with the prospect of having to replace ECB financing with new bailouts, as happened in Ireland.
Mr Trichet said the soft loans to the banks would "now be extended and also adjusted as appropriate", adding that the ECB would continue to buy sovereign debt "commensurate" with need. The bank is rumoured to be holding a large quantity of Irish government bonds.
Meanwhile, Spain succeeded in seeing its latest bond auction away, although the 3.72 per cent yield on the €2.5bn issue was more than 1 percentage point more than at a similar auction in October.