Euro crisis shows signs of easing but far from over

BY AGENCIES

THE eurozone debt crisis is showing signs of easing now that the European Central Bank has injected cheap money into the economy and the European Union has agreed on a new fiscal accord.

As borrowing costs for eurozone countries declined, Portugal returned to the government bond market with a better response than expected for the first time this year.

The yield rate of Italian 10-year bonds dropped from peaks at around 8 percent to 6 percent in January, while Spanish 10-year bonds fell below 5 percent.

International rating agencies Standard & Poors and Fitch downgraded the credit ratings of some eurozone countries, including France, in January, but without having a huge impact on the European market.

ECB chief Mario Draghi said last Friday that financial market have revived since the central bank injected nearly 500 billion euros (633.3 billion U.S. dollars) into eurozone banks since late December.

"We know for sure that we have avoided a major credit crunch, a major funding crisis." Draghi said at the recent World Economic Forum in Davos.

A total of 523 European banks applied for the 3-year loans, which come with a low interest rate of 1 percent.

According to a recent Morgan Stanley report, Italian banks were the biggest users of the ECB fund, receiving 50 billion euros (65.55 billion U.S. dollars), which covered more than 90 percent of their funding requirements for 2012.