FRANKFURT: European Central Bank President Mario Draghi said on Thursday that recent action to flood the eurozone banking system with unprecedented volumes of cash had been an "unquestioned success."
In two so-called long-term refinancing operations or LTROs in December and February, the ECB lent more than 1.0 trillion euros ($1.3 trillion) to eurozone banks at rock-bottom interest rates in order to avert a dangerous credit squeeze.
The ECB hopes the banks will lend the money to households and businesses and also use it to bring down government borrowing costs.
"Both operations I would say are an unquestioned success," Draghi told a news conference here.
"The risk environment has improved enormously. Markets have reopened ... even the interbank market ... has also started working slightly better. Certainly, we see many signs of returning of confidence in the euro," the ECB chief said.
He stressed that the LTROs were only temporary measures and that governments should not ease up on their efforts to get their finances in order.
"Now the ball is in the governments' court," he said. "They should continue their reforms" and banks must continue to "repair their balance sheets."
The LTROs have "created the situation where these efforts can be undertaken. Governments should not be complacent," he said.
"We call them non-standard measures for one reason, they are taken for non-standard situations. They are temporary in nature. We have to go back to normal, classical central bank policy," he added.
Draghi revealed that of the 800 banks that borrowed the 529.5 billion euros at the latest LTRO last week, 430 were small banks in Germany which traditionally lend to the small and medium-sized enterprises (SMEs) which form the backbone of the German economy.
"This money is now closer to the SMEs than it was before, which was one of the arguments to involve a very large number of participants," Draghi said.
"I'm not saying it will actually go to the SMEs, but it certainly brings it one step closer."
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