Blog Post

Chart of the week – The consequences of financial disintegration

The recent ECB report on "Financial Integration in Europe" has exposed in detail the deterioration in European financial market integration caused by the crisis. Banks located in the weakest countries find it more and more difficult to access liquidity, and this translates into segmented funding conditions for the private sector as a whole and forces […]

By: and Date: May 3, 2012 Topic: European Macroeconomics & Governance

The recent ECB report on "Financial Integration in Europe" has exposed in detail the deterioration in European financial market integration caused by the crisis. Banks located in the weakest countries find it more and more difficult to access liquidity, and this translates into segmented funding conditions for the private sector as a whole and forces the ECB to play an ever bigger role as financial intermediary of last resort in lieu of a structurally malfunctioning interbank market.

Figure 1: Financial disintegration and the mediating role fo the ECB

Source: National Central Banks; ECB. South = Greece, Ireland, Portugal, Spain, Italy; North = Germany, Luxembourg, Finland, Belgium.

Figure 1 shows that countries in the South of the Euro Area have been taking up an increasing share of Eurosystem liquidity since the start of the crisis, while the share of North has been declining. During 2011, Greece, Ireland, Portugal, Italy and Spain accounted for about 70% of the entire Eurosystem liquidity, which has been key in replacing outflows of private capital and sheltering countries from the consequences of a sudden stop in capital flows (see our recent Policy Contribution on this question).

But our reconstruction on a country by country of the use of the LTRO in figure 2 illustrates interesting divergence even within the aforementioned groups of countries. This data is not straightforward to gather. The ECB only publishes the aggregate volume of Marginal and Longer Term refinancing Operations (MRO and LTRO), without any country breakdown. To reconstruct each country’s share, we merged data provided by National Central Banks but the aggregation sometimes may require some assumption due to the different periodicity of data publication or level of details. For example, we had to keep the shares of Greece and Italy in March fixed at the same level as they were in February, because the latest data have not been released yet. Data for France only cover the period of 2011, because a monthly breakdown is not available for previous years.

Figure 2: Country breakdown of ECB liquidity provision

Source: National Central Banks, ECB. Note: the Bank of Greece has not published the disaggregation of Central Banks’ lending into MRO and LTRO since December. Data for January and February are therefore proxied with the general series “Claims on Domestic MFIs” on the Bank of Greece’s balance sheet assets. Over the past, the series however is very consistent with the numbers that we would obtain by summing LTRO and MRO figures.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read about event More on this topic
 

Upcoming Event

Sep
1
12:30

The EU recovery fund - state of play and outlook

Bruegel Annual Meetings, Day 1- In this session we will discuss the EU recovery fund, its state of play and outlook.

Speakers: Nadia Calviño, Karolina Ekholm and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Upcoming Event

Sep
2
10:00

Conversation on the recovery programmes

Bruegel Annual Meetings, Day 2- In this session, we discuss the recovery programmes.

Speakers: Maria Demertzis, Henry Foy and Tadeusz Kościński Topic: European Macroeconomics & Governance Location: Palais des Academies, Rue Ducale 1
Read about event
 

Upcoming Event

Sep
2
13:00

European banks: under global competitive pressure?

Bruegel Annual Meetings, Day 2 - European banks have lost stature and remain generally low-profitability, low-valuation in comparison to their global peers. Is that a problem? If so, what can EU policymakers do to address it?

Speakers: José Antonio Álvarez Álvarez, Mairead McGuinness and Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Palais des Academies, Rue Ducale 1
Read about event More on this topic
 

Upcoming Event

Sep
2
15:45

Blending physical and virtual: shaping the new workplace

Bruegel Annual Meetings, Day 2 - This panel will cover the changes the COVID-19 pandemic made to our workplaces, and what to expect in the near future.

Speakers: Nicholas Bloom, Michael Froman, Mario Mariniello, Sara Matthieu and Luca Visentini Topic: European Macroeconomics & Governance Location: Academy Palace
Read about event More on this topic
 

Upcoming Event

Sep
3
10:15

Conference on the Future of Europe: envisioning EU citizens engagement

Bruegel Annual Meetings, Day 3 - Panellists will discuss different options and what they may entail while revisiting the debates on the future of Europe at national and EU-level that have been conducted thus far.

Speakers: Caroline de Gruyter, Kalypso Nicolaïdis, Niclas Poitiers and György Szapáry Topic: European Macroeconomics & Governance Location: Palais des Academies, Rue Ducale 1
Read about event More on this topic
 

Upcoming Event

Sep
3
09:00

The role of the EU's trade strategy for an inclusive and sustainable recovery

Bruegel Annual Meetings, Day 3 - We are delighted to welcome Valdis Dombrovskis, Executive Vice President of the European Commission for An Economy that Works for People to talk about Europe's trade strategy.

Speakers: Valdis Dombrovskis, Alicia García-Herrero and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Palais des Academies, Rue Ducale 1
Read article
 

Blog Post

Will European Union recovery spending be enough to fill digital investment gaps?

The recovery facility will boost digital transformation, but questions remain whether it will be sufficient to achieve Europe’s digital ambitions.

By: Zsolt Darvas, J. Scott Marcus and Alkiviadis Tzaras Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: July 20, 2021
Read article Download PDF
 

Policy Contribution

A new direction for the European Union’s half-hearted semiconductor strategy

The EU needs a more targeted strategy to increase its presence in this strategic and thriving sector, building on its existing strengths, while accommodating its relatively low domestic needs.

By: Niclas Poitiers and Pauline Weil Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: July 15, 2021
Read article More by this author
 

Blog Post

Fit for 55 marks Europe’s climate moment of truth

With Fit for 55, Europe is the global first mover in turning a long-term net-zero goal into real-world policies, marking the entry of climate policy into the daily life of all citizens and businesses.

By: Simone Tagliapietra Topic: Energy & Climate, European Macroeconomics & Governance Date: July 14, 2021
Read article More on this topic
 

Blog Post

Fair vaccine access is a goal Europe cannot afford to miss – July update

European countries must do more to tackle the vaccine uptake gap. Vaccination data should be published at the maximum granularity level so researchers and local decision-makers can monitor progress.

By: Lionel Guetta-Jeanrenaud and Mario Mariniello Topic: European Macroeconomics & Governance Date: July 14, 2021
Read article More by this author
 

Blog Post

SPACs in the gap

Special-purpose acquisition vehicles could fill a gap in European equity markets and lure risk-averse investors off the sidelines.

By: Rebecca Christie Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: July 13, 2021
Read article More on this topic
 

Blog Post

A breakdown of EU countries’ post-pandemic green spending plans

An analysis of European Union countries’ recovery plans shows widely differing green spending priorities.

By: Klaas Lenaerts and Simone Tagliapietra Topic: European Macroeconomics & Governance Date: July 8, 2021
Load more posts