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Mar18-12, 04:07 PM
P: 140
Due to the credit crisis some European countries have asked for external help provided by a Troika constituted by the European Central Bank, International Monetary Fund and European Commission. In the loans that the Troika is giving to countries like Portugal, Ireland and Greece, where does the "money" come from? Is it only from funds of the IMF and the ECB, or it also comes from private banks and other lenders? In either case the countries are paying interest and spreads relative to the loans. This spread is destined to cover the loan service of those institutions, or it has other functions/destinations?
Also, and a different matter, how do central banks choose to which commercial banks they will lend money? What are the criteria that makes a bank suitable for a direct loan from the central bank? In the case of the Eurozone is the country to which the bank belongs considered in the criteria for choosing the eligible institutions to borrow money from the European Central Bank?
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