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Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast (EEF) comments ahead of ECB interest rate decision
"We expect the ECB to leave interest rates unchanged but to signal a rate cut in March.
"The ECB will also confirm that it will run another three-year Long-Term Refinancing Operation (LTRO) in February. These three-year loans first provided at the end of December have proved very successful in improving investor sentiment. They have provided much needed relief to banks that need to secure large amounts of financing in difficult market conditions and they have shown that the ECB is ready to go beyond the existing set of tools to support the banking system. This has been instrumental to make sure that the Eurozone can face the number of pitfalls looming in 2012, starting with the negotiations on the second Greek bailout and the Private Sector Involvement.
"The ECB is also likely to comment on the possibility that it may forego profits on the Greek government bonds on its balance sheets. If this helps bring the PSI negotiations to an orderly close, we would see this as a favourable measure.
"The priority for the Eurozone is to ensure a sustainable framework to finance Greece and to prevent contagion to other countries."
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