The ensuing restricted credit supply could have dragged the whole euro area economy further into recession and could have even led to deflationary risks. More specifically, the VLTROs have helped tackle financial fragmentation. Recourse to these policies has been particularly intense in countries facing stress in sovereign bond markets and where dried-up interbank funding has been replaced with ECB liquidity.
The policies  5  See, for example, Gertler, M. and Kiyotaki, N. (2013), “Banking, Liquidity and Bank Runs in an Infinite Horizon Economy” at http://www.princeton.edu/~kiyotaki/papers/GertlerKiyotakiBankRunModel2013May22.pdf. 6  See Darracq-Paries, M. and De Santis, R. (2013), “A non-standard monetary policy shock – the ECB’s 3-year LTROs and the shift in credit supply”, Working Paper Series, No 1508, ECB, Frankfurt am Main, January.