ECB to eliminate emergency financing measures in 2010

European Central Bank will eliminate starting next year, the emergency operations concerning the funding of the banking market, as the Eurozone economy is beginning to recover.

The Chairman of the ECB, Jean-Claude Trichet, yesterday said in Frankfurt: "The improvement of conditions on the financial markets have shown that our steps to insure liquidity on the markets are not needed as they were in the past. There will be plenty of liquidity in the next few months".

It has to be reminded that the ECB has supplied Eurozone banks with cheap funding, to fight recession and to help interbank lending recover. Trichet said that the emergency measure to offer six-month loans will expire at the end of Q1 2010. The ECB will however continue to provide banks with unlimited funding through its main refinancing operations, at a fixed interest rate, until April 13th, 2010.

Yesterday, the ECB decided to maintain the key rate at a historical low of 1%. The management of the ECB feels that this is level is adequate.

• More upbeat forecasts

The ECB has improved its economic growth forecasts for 2010 for the Eurozone.

According to the new estimates announced by Jean-Claude Trichet, the 16 countries that use the Euro would grow by 0.8% in 2010, compared to the previously estimated 0.2%. The ECB expects a 1.2% growth in 2011 for the Eurozone.

What"s more, for this year, the ECB expects a lower recession than previously expected: -4%, over September"s estimate of -4.1%.

Jean-Claude Trichet said that the 2010 recovery of the "Eurozone" would be "anemic" and "uneven". The economy of the region exited the recession in Q3 2009.