PARIS: European sovereign debt sales have been going much better since the European Central Bank (ECB) started to extend long-term loans to banks last month, ECB governing board member Christian Noyer said on Friday.
With the ECB providing cheap funds massively to Europe's banks, Noyer said there was no reason that they should refrain from buying up government bonds and lending to the wider economy.
"Since the ECB launched its big 3-year refinancing operation worth 500 billion (euros), we have in reality state debt issuances which have gone very well," Noyer, who is also governor of the Bank of France, told Europe 1 radio.
Noyer said France's latest bond auction had gone smoothly and there were no doubts about the country's ability to repay its debts, though he called for shoring up public finances in a rapid and credible manner.
France drew solid demand at its first bond auction of 2012, issuing nearly 8 billion euros with yields rising only slightly despite concerns that the country could soon lose its top-notch AAA credit rating.
Euro zone banks received 489 billion euros last month in the first of two opportunities to access longer-term money in an operation aimed at encouraging cautious banks to lend to each other and the wider economy.
Equipped with cheap funds in large quantities from the ECB, Noyer said that he expected banks to step up their lending to the both companies and consumers and that they also had every capacity to buy government bonds.
"There is no reason why they should be timid about it (buying government bonds)," he said. "Since the refinancing operations have gone well at the end of last year and the beginning of the year, I think that it is starting to work."
Noyer said the ECB would again provide banks with as much funds as it judged necessary at its next 3-year refinancing operation in February.
"In the current situation we consider that we can refinance the banks without risk," he said.
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