- Nick Kounis, head of macro research at ABN Amro Bank NV
In the European Central Bank's second round of targeted long-term loans Euro zone financial institutions borrowed less than expected, complicating the central bank's balance sheet expansion goal. Altogether, 306 banks took up 129.84 billion euros in the auction, more than they did in September but considerably below analysts' expectations. The cheap, long-term loans from the Frankfurt-based central bank to Euro zone banks are part of the ECB's easing package, which is aimed at boosting lending in the currency bloc, spur growth and lift inflation. Coupled with purchases of asset-backed securities and covered bonds, the ECB plans to expand its balance sheet by almost €1 trillion to €3 trillion by late 2016. However, following the weak uptake in the TLTRO, pressure has been increasing on the ECB to eventually deploy full-blown quantitative easing if it is to achieve its goal to expand the balance sheet to near March 2013 levels. Meanwhile, Greece's unemployment rate fell again in September, declining to 25.7% from a revised reading of 26.0% a month earlier. Nevertheless, the job market improvement is stubbornly slow and Greece's jobless rate is still the highest in the Euro zone, despite third-quarter GDP growth of 1.9%, the best result since 2008. Greece brought forward its presidential election by two months, in an attempt to end political uncertainty, following the Eurogroup's approval of Greece's request for a two-month extension to its bailout program.
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