Recent news on the euro-zone economy has dampened hopes that that the ECB’s longer-term refinancing operations (LTROs) in December and February had largely solved the euro-zone’s economic and fiscal problems. Activity surveys like the Purchasing Managers’ Index suggest that the economy contracted for a second consecutive quarter in Q1 2012 (see Chart), while the news on the labour market and bank lending has also deteriorated. Meanwhile, at least some of the post-LTRO euphoria in the financial markets has also faded.
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