It may also create spillover effects to other segments of the corporate credit market, as investors in bank bonds will be induced – by a scarcity of supply – to diversify away from that market and re-invest in other market segments. The latter mechanism is not dissimilar to the “portfolio balance channel”.1  The TLTROs are targeted operations.
Structural reforms should focus on fostering private investment and job creation. To restore sound public finances, euro area countries should proceed in line with the Stability and Growth Pact and should not unravel the progress made with fiscal consolidation. Fiscal consolidation should be designed in a growth-friendly way.