To ease liquidity problems in the banking sector, the European Central Bank (ECB) released 489 billion euros worth of three year funding to 523 banks yesterday, who have struggled to finance their financial obligations and fresh business lending in the current crisis.

It is hoped that the banks who have taken up this cheap money, might well use it to buy sovereign debt but there is no guarantee this will happen.

The underlying liquidity problem that has motivated the ECB to take this course of action, has been caused by banks lending to countries with huge debt piles, they cannot service without intervention and the fear that there may be a full or partial default by these countries, as in the case recently with Greece. There has been a reluctance to lend to banks with risky sovereign debt on their balance sheets and the ECB has stepped in to resolve this problem.