Draghi expected to provide 700 billion euros of cheap funding

ECB President Mario Draghi's testimony is scheduled for today's evening at the European Parliament in Strasbourg and economists expect that the newest stimulus tool announced by Draghi will deliver more than 700 billion euros of cheap funding to banks. The targeted lending scheme for banks is seen spurring credit for the real economy as planned, and help provide the region's financial system with abundant cash. Lending to companies and households has been identified as a key weakness in the Euro zone's fragile recovery. The TLTRO programme offers four years of low-cost funding tied to bank lending that could provide as much as 1 trillion euros. The TLTRO will run alongside the stimulus measures that the central bank announced after its June 5 policy meeting, including a negative deposit rate and an extension of unlimited short-term liquidity until at least 2016. After the July meeting, Draghi reiterated his pledge that rates will stay unchanged for an extended period. 

Meanwhile, German Chancellor Angela Merkel believes that turmoil in global markets caused by Portuguese bank Banco Esperito Santo SA last week highlights the Euro zone's fragility and indicates the need for governments to respect debt and deficit limits. Merkel's comments was a renewed message to France and Italy to restrain from softening the Euro region's rules.