Banks in Greece, Portugal, Ireland and Spain account for more than two-thirds of the increase in lending to eurozone financial institutions by the European Central Bank since the summer of 2008 as many struggle to access financial markets.
The heavy reliance of these banks on the ECB for funding is a sign of the growing stresses in the eurozone as investors and other banks refuse to lend to them because of fears that the debt crisis in the 16-nation bloc will deepen.
Banks in the four countries have borrowed €225bn ($277bn) of the €332bn increase in lending since June 2008, according to the Royal Bank of Scotland, which compiled the information from eurozone central banks. This is 68 per cent of the rise in lending, yet these countries only represent 18 per cent of the eurozone’s gross domestic product.(,,,)
Many banks are refusing to lend to institutions in the four countries, preferring instead to park their cash at the ECB, in spite of the very low deposit rate of just a quarter of a point. Banks deposited €213bn at the ECB on Tuesday, which is much higher than before the financial crisis.
Greece is the most reliant on the ECB. It has taken €78.1bn of the increase in lending, followed by Ireland at €54.3bn, Portugal at €34.bn and Spain at €58.4bn. Germany has taken an extra €17.8bn..