FRANKFURT: The European Central Bank saw far less demand than expected on Thursday for its new four-year loans to banks, raising doubts about a stimulus package it hopes will stave off deflation and revive the euro zone economy.

The launch of the scheme, a central plank of the ECB’s efforts to coax reluctant banks to lend, saw the euro zone’s central bank hand out 82.6 billion euros of 400 billion euros ($515.16 billion) on offer to 255 banks.

That was well below the 133 billion euros forecast by a Reuters poll of 20 money market traders. Banks will get a second chance on December 11 to apply for the cash - granted at ultra-low interest rates on condition they lend it on to businesses - when the poll predicted take-up of 200 billion euros.

Berenberg Bank chief economist Holger Schmieding called the low demand “a disappointing result for the ECB” that cast doubt on the bank’s hopes of injecting 400 billion euros into the economy through this scheme. “Simply offering more liquidity at more generous terms to banks awash in cash will not make a huge difference to the outlook for growth and inflation,” he said.

The key problems were weak demand for credit in the euro zone, exacerbated by economic conflict with Russia over Ukraine and uncertainty in the banking sector ahead of the publication next month of an ECB health check on major banks.

The success of the so-called TLTRO cheap credit project is important for the euro zone, whose 18 countries are grappling with record-high unemployment and fading economic growth.

Previous rounds of cheap ECB loans for banks and borrowing costs close to zero have done little to boost lending to companies, with much of the money instead spent on government bonds. Critics fear a similar fate for the new scheme. Market reaction was muted. The euro rose briefly against the dollar, while benchmark German government bond futures dipped.—Reuters