In fact, overall liquidity provision was more or less unchanged. There is one notable exception to this statement, namely the provision of unlimited liquidity for two weeks over the turn of year 2007/2008, which resulted in a temporary expansion of the ECB’s balance sheet. After September 2008, the balance sheet grew considerably in size. There are a number of reasons for this.
Households have, over recent months, adopted a more cautious attitude to borrowing and spending, the evidence for which is a string of flat results for retail sales, and a significant decline in the flow of new loan approvals for housing. Credit approvals to businesses have also declined significantly.