Who is the ECB helping?

There were three scary prospects hanging over the European economy when the ECB launched its three year emergency lending programme for banks, the second phase of which has now been completed.

Some 800 banks have hoovered up 529bn euros in cheap money. We don't know yet what they are planning to do with it. But if the first batch is any guide, the loans will go some way to tackling the first two fears hanging over banks and governments.

Whether it will do anything to cheer up Europe's real economy is much less clear.

You'll remember that fear number one was that a major European bank - in Italy, for example - would simply run out of money, triggering a regional and, quite likely, global freeze in wholesale financial markets similar to October 2008.

As Robert Peston has described in his latest post, this risk had been largely neutralised by the flood of ECB largesse, at least for the foreseeable future.

Almost by definition, a three-year loan programme is not going be a permanent solution to anything. The clue's in the name.

But three years is a long time, even by the tortured standards of Eurozone policy making.

You never know, by 2015, the market for bank funding could look very different than it does today. (Here's hoping.)

Fear number two, which also seemed very real at the end of 2011, was that a major economy like Italy would actually face a funding strike - meaning that it could not borrow the billions it needed to roll over its debt and fund its budget deficit. Or at least, that it could not do so at any remotely sustainable rate.

The latest monetary statistics for the Euro area, released yesterday, show that troubled sovereigns have indeed done very well out of the first batch of ECB loans, in December.

Spanish banks' holdings of government debt rose by 23bn euros in January. They rose a similar amount in December.

That means they have bought an extra 46bn euros worth of government bonds in the two months since the new ECB loan programme started. That's nearly five times more than they bought in the first 11 months of 2011.

As Julian Callow, of Barclays Capital, has pointed out, that 46bn euros is also the equivalent of more than half of the money the Spanish government needs to borrow this year to cover its budget deficit and maturing debt. So with today's loans, Spain's banks could cover the lot. If they decide to do so.

Italian banks' holdings of government debt also rose in January, by a record 21bn euros. That's around a 10th of the government's financing needs in 2012, but the second batch of money will almost certainly see them buy a lot more.

So, good news for governments, then. Even if it sounds like bad news to the likes of the Bundesbank President, Jens Weidmann, who worries that this backdoor bailout has let governments off the hook.

But there was also a third, more mundane, fear hanging over Europe in December: that continued de-leveraging by banks, companies and governments, across the region, would make it almost impossible for Europe to grow.

Has the ECB's cheap money fix done anything to ease the fears hanging over the real economy? Yes and no.

It has helped to the extent that a panic over banks or sovereigns banking crisis would obviously have had a devastating impact on the wider economy.

But there is little sign that the ECB money has done anything directly to ease the flow of credit to European companies. The January figures show banks' loans to companies outside the financial sector have fallen by 37bn euros since the start of December.

The crunch has been especially severe in Spain, where lending to non-financial companies fell by a record 5% year on year, last month, compared with an average fall of 2.9% in 2011.

True, European banks would be lending even less to companies and households, if the ECB had not stepped in with its cheap money fix.

So the real economy will benefit from today's "free" money for banks from the ECB - as it benefited from the first batch in December.

But on the list of big winners from the LTRO, right now ordinary companies and households are coming a distant third.

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