These operations, in combination with our measures to enhance the availability of collateral, were pivotal in preventing a disorderly process of lenders’ deleveraging and a large-scale credit crunch. This action was instrumental in maintaining price stability. Later in 2012, a renewed confidence crisis, in part reflecting unwarranted investor fears about the reversibility of the euro, caused a severe deterioration in financial markets.
A year ago, it was unclear whether the ECB would be prepared to buy sovereign debt in large quantities. It was unclear how the funding stresses in the banking system would be resolved. And it was unclear just how much political support there was for more centralised bank supervision as well as the various European financial support mechanisms.