Not so fast! The first of the European Central Bank’s one-year emergency loans to eurozone banks is due to be repaid today amid pleas to renew the 12-month lifeline. Some fear that repayment of the €442bn facility could trigger a credit crunch for eurozone banks such as Spain’s unlisted savings banks, or cajas, and the banks of Greece, Ireland and Portugal. They have struggled to fund themselves in interbank markets and depend heavily on ECB funding. The ECB, although keen to wean banks off its liquidity support, has partially addressed such concerns by offering them

three-month loans. Worries may have been overdone anyway: take-up of the short-term liquidity in yesterday’s auction, at €132bn, was much lower than the €250bn-€300bn expected, suggesting that banks are finding it easier to fund themselves. European bank shares rose slightly after Tuesday’s heavy sell-off.

The ECB therefore looks to have been partially successful in its attempt to reduce banks’ dependence on its funding and will drain some €300bn of surplus liquidity from the system. That is no bad thing: its lending to eurozone banks stands at almost €1,000bn, about double what it was lending before Lehman Brothers’ collapse. The auction’s lower-than-expected take-up, however, does not signal an end to the eurozone bank funding crisis. Far from it. That 171 banks rushed to snap up more than one followed by 11 zeros’ worth of euros at 30 basis points above three-month Libor indicates that all is still not well for many lenders.