I’m a little bit surprised by the tone of Buiter’s comments here. It is well known that one of the reasons interest rate cuts in recessions can help the banking sector is that the banks can then make profits from a steep yield curve, borrowing short and lending long. The scale of this operation may be unprecedented but calling it a subsidy or a gift seems overly dramatic.
Like many on the outside, he is trying to undermine the Euro. Every CB that can is engaging in QE. If EU banks get more capital, they compete more successfully even surviving. Protectionism type comment. Economists have biases too!
karl whelan appears to dispute the nature of the ECB “subsidy or gift” to the banks. However, borrowing at 1% and buying Government Bonds yielding 5.9% (which then can be used again for more borrowing) seems to be more of a gravy train. No wonder they are not lending to business. Have a look at the long dated bond turnover on the ISE site.