The European Central Bank Tuesday invited invidividual banks on the continent to bid for a fresh round of long-term loans it hopes will stimulate lending to businesses and reinvigorate the euro-zone economy but which may see only modest take-up.
The program is a key plank of ECB efforts to stave off the threat of deflation and breathe life into the euro-zone economy, which stagnated in the second quarter. At 0.3%, inflation is running well below the ECB target of just under 2%.
The ECB will announce how much it is granting banks in the new loans early Thursday, doling out the fresh cash just as the cheap three-year long-term loans - or LTROs - that it issued in late 2011 and early 2012 approach expiry.
The new targeted funds, or TLTROs, will also offer banks long-term funding at interest rates close to zero, but will be tied to lending to the mostly smaller firms that are the euro zone's economic backbone.
Analysts are skeptical the operation will boost lending.
"It doesn't matter how much liquidity you give banks. They will still not lend," said a banking expert with ratings agency Fitch.
Fitch believes the weak state of many companies in southern Europe and subdued demand means banks have little appetite to issue corporate loans in the region.
ECB President Mario Draghi said earlier this month he wanted the TLTROs, together with a new ECB asset-purchase program, to swell the central bank's balance sheet - an exercise aimed at freeing up the flow of credit and stimulating the economy.
Draghi said he wanted the balance sheet to get back to levels seen in early 2012 - up to a trillion euros higher than its current size.
