The increase in the balance sheet was dependent on the demand of primary liquidity by the banks, facilitated however, by the provision of liquidity through a regime of fixed rate full allotment of banks’ demand, introduced in September 2008. The impact on overall monetary conditions was, as before the crisis, dependent on the behaviour of the banks to passthrough the higher monetary base into credit and broad money, which did not happen. What did happen was a justified fulfilment of the role of lender of last resort but not a new type of monetary policy instrument in the sense of aiming at a new transmission channel. The adoption of a fixed-rate full allotment regime of liquidity provision, which has been in place since and was recently extended until December 2016 (at the very least) was indeed an extraordinary unconventional measure. It supported the banking sector and avoided a more detrimental credit crunch. However, the size of our monetary base declined significantly during 2013 when banks decided to start the repayment of their previous high borrowings. On the other hand, as per the following table, total outright purchases of assets by the ECB under two different programmes was not behind the increase of the balance sheet as they represent a relatively small proportion of total assets compared with other central banks.
As mentioned, the transmission channels at play in the recent QE experiences are indeed different from the traditional quantitative view. Chart 2  The ECB monetary policy in the European crisis. As the financial crisis led to the Great Recession and then evolved into the European sovereign debt crisis, the ECB started providing liquidity in fixed-rate full allotment mode, progressively and considerably extended the maturity of its loans to commercial banks, widened the set of eligible collateral, made medium-scale purchases of financial assets and announced the Outright Monetary Transactions programme. As a result of these extraordinary measures, at the end of 2012 calm started returning in financial markets, leading to lower financial spreads and a reduction in volatility. The initial  2  Quoted by Michael Woodford in his 2012 Jackson Hole paper “Methods of policy accommodation at the interest rate lower bound”. 4  BIS central bankers’ speeches  signs of economic recovery started appearing. Preliminary formal analyses indicate that nonstandard measures were instrumental in supporting financial intermediation and economic activity in the euro area.3 Despite these recent, encouraging developments on the financial side, real economy recovery has been weak and inflation outcomes have been surprisingly low. The new challenge we face in the euro area today is to avert the risk of a prolonged period of excessively low inflation. Euro area annual HICP inflation was 0.5% in May 2014, after averaging 0.7% in the first four months of the year.