ECB Lends Record $622 Billion in Bid to Ease Crisis

ECB Lends Record $622 Billion in Bid to Ease Crisis

(Source WallStreet Journal) FRANKFURT -- The European Central Bank pumped a record €442 billion ($622 billion) into euro-zone money markets Wednesday in its first-ever offer of one-year funds as it battles the Continent's recession.
Euro-zone banks borrowed the one-year funds, the largest amount the central bank has ever dispersed in a single shot, at the ECB's current key rate of 1%. Much of the total likely substituted for amounts banks had been borrowing from the ECB for shorter periods, so the net stimulus to the economy is less than it appears at first sight.
The novelty lies more in the length of time over which the ECB is prepared to offer unlimited funding, reflecting a desire to bring longer-term money-market interest rates down. Although the risk premium that banks charge each other for funds has fallen since the dramatic days of September, it still appears big enough to strain the economy.

The ECB's move signals the central bank remains committed to bolstering the euro-zone economy even as policy makers world-wide discuss how best to unwind the welter of monetary and fiscal stimulus pumped into the global economy over the course of the crisis. The ECB believes the 16-nation euro-zone economy will start growing again by the middle of 2010.

The ECB said in May that it would begin offering banks funds for one year. Before Wednesday, the longest period banks could borrow from the central bank was six months.

Obama expedites stimulus

Obama expedites stimulus
(02:15) Report Reuters Video

Jun. 8 - President Obama is expediting the economic stimulus package that Congress passed in February in order to create 600,000 jobs over the next 100 days.

SOUNDBITES:
# U.S. President Barack Obama
# Dan Mitchell, senior fellow at the libertarian Cato Institute,Jon Decker reports.

IMF Spells Out Need for Global Fiscal Stimulus

IMF Spells Out Need for Global Fiscal Stimulus
IMF Survey online December 29, 2008

As the world struggles to contain the continued fallout from the financial crisis, attention has shifted from rescuing failing financial institutions to supporting domestic demand, which has fallen off sharply almost everywhere.
In November, the IMF cut its forecast for global growth by ¾ percentage point to 2.2 percent for 2009. But, with the crisis spreading rapidly, IMF First Deputy Managing Director John Lipsky has said that the Fund is likely to make further downward revisions in the new global forecast it will announce in January 2009.
In this interview, Olivier Blanchard, Economic Counsellor, and Carlo Cottarelli, Director of the Fiscal Affairs Department, flesh out the call for a global fiscal stimulus, first proposed by IMF Managing Director Dominique Strauss-Kahn in the context of the November 15 emergency summit called by the leaders of the Group of 20 (G-20) industrialized and emerging market economies.Read article...

The International Monetary Fund’s Managing Director Dominique Strauss-Kahn said in a Jan. 9 interview that governments in Western Europe are “behind the curve” in implementing stimulus packages and are “underestimating the needs.” He said the full impact of the slump hasn’t hit the region, where “shops are still full.”

Fiscal Policy for the Crisis (pdf)