The ECB steps up to take a pivotal role
In a move reminscent of the Federal Reserve’s decision to begin providing American banks with emergency loans, the European Central Bank began in late 2011 to send emergency loans to European banks. The importance of the decision is less about the banks themselves and more about their ability come to the aid of their national governments.
“And, at least for now, the effort has worked. Spain’s 10-year bonds carry interest rates that hover around 5.5 percent, compared with 7 percent and higher in November, and Italy’s five-year bonds are approaching 5 percent, down from nearly 8 percent at their peak,” reports the New York Times.
But, the ECB can only offer solutions to one side of the coin. The looming crisis is the potential Greek default. Talks held over the weekend to secure a deal that would allow Greece to write off some of their debts fizzled and some analysts believe a Greek default would deal a major blow to European economies.