RANKFURT — Banks clamored for emergency funds from theEuropean Central Bank on Tuesday, borrowing the most since early 2009 in a clear sign that the euro region’s financial institutions are having trouble obtaining credit at reasonable rates on the open market.
In a Tuesday auction, the Spanish treasury, for example, was forced to sell three-month bills at a price to yield 5.11 percent, more than double the 2.29 percent interest rate investors demanded at a sale of similar Spanish securities on Oct. 25. Spain also sold six-month debt at 5.23 percent Tuesday, up from 3.30 percent in October.
Italy’s 10-year bond yield, meanwhile, edged up once again — to nearly 6.8 percent Tuesday — as foreign investors withdrew their money from that debt-staggered country.
Together, the commercial banks’ heavy reliance on the central bank to finance their everyday business needs, along with the growing borrowing burden for Spain and Italy, raise the risk of failure for some banks within the countries that use the euro and the danger that nations much larger than Greece could eventually seek a bailout or be forced to leave the euro currency union.
European stocks were down broadly on Tuesday’s gloomy news. In the United States, stocks closed lower, too, but were not down as much as they had been before the International Monetary Fund announced at midday that it would extend a six-month lending lifeline to nations that might seek it in response to the euro zone crisis.
At the same time, though, the central bank continued to resist calls that it stretch its mandate and expand the money supply, as the United States Federal Reserve and the Bank of England have done.
The European debt crisis has crimped the flow of funds to banks by raising doubts about the solvency of institutions with a large exposure to European government debt. In particular, American money market funds have severely cut back their lending to European banks in recent months, leading many institutions to turn to Europe’s central bank.
Compounding the problem, many banks using the euro have also had trouble selling bonds to raise money that they can lend to customers. That raises the specter of a credit squeeze that could amplify an impending economic slowdown. In addition, some banks may fail if they are unable to raise short-term cash.
The central bank said Tuesday that commercial banks had taken out 247 billion euros, ($333 billion), in one-week loans, the largest amount since April 2009. And the 178 banks borrowing from the central bank on Tuesday compared with the 161 banks that borrowed 230 billion euros ($310 billion) last week.
Since 2008, the central bank has been allowing lenders to borrow as much as they want at the benchmark interest rate, which is now 1.25 percent. Banks must provide collateral. But the central bank is not supposed to prop up banks that are insolvent, only those that have a temporary liquidity problem.
And while the central bank has been buying bonds from countries like Spain and Italy to try to hold down their borrowing costs, the amount —195 billion euros ($263 billion) so far — is modest compared with the quantitative easing employed by other central banks like the Fed.
A growing number of commentators say the European Central Bank should be authorized to buy government bonds at levels sufficient to stimulate the economy.
“It is essential to have a central bank free to use all the levers, including variants of quantitative easing,” Adair Turner, chairman of Britain’s bank regulator, the Financial Services Authority, told an audience in Frankfurt late Monday. The audience included Vítor Constâncio, vice president of the central bank.
Richard Koo, chief economist at the Nomura Research Institute, wrote in a note Tuesday that “the E.C.B. should embark on a quantitative easing program similar in scale to those undertaken by Japan, the U.S. and the U.K.”
“Doubling the current supply of liquidity,” Mr. Koo said, “would not trigger inflation and would enable the E.C.B. to buy that much more euro zone government debt.”
But there has been no sign the central bank will budge from its position that it is barred from financing governments, and that purchases of government bonds are justified only as a way of keeping control over interest rates and fulfilling the bank’s main task to keep prices stable.
“By assuming the role of lender of last resort for highly indebted member states, the bank would overextend its mandate and shed doubt on the legitimacy of its independence,” Jens Weidmann, president of the German Bundesbank and a member of the central bank’s governing council, said Tuesday in Berlin.
“To follow this path would be like drinking seawater to quench a thirst,” he said.
Lucas D. Papademos, the new prime minister of Greece and a former vice president of the central bank, met with Mario Draghi, the central bank’s president, when he visited the bank on Monday. The bank did not disclose details of their discussions, but Greece’s fate is to a large extent in the central bank’s hands. Because of its bond purchases, the central bank is the Greek government’s largest creditor, and the bank is one of the institutions that determines whether Greece will continue to receive aid from the 17 European Union members that use the euro.