Emergency help for financial markets has entered new territory with the European Central Bank offering unlimited funds at below market interest rates in a special operation to head off a year-end liquidity crisis. Financial Times

The surprise move, which follows last week’s co-ordinated barrage of measures by the world’s central banks to increase market liquidity, suggests the ECB is still frustrated at the failure to ease market tensions.

The measure was reminiscent of the ECB’s operation on August 9, at the start of the global credit squeeze. But that was for overnight loans while the new offer is for two weeks.

Analysts warned that the measure risked increasing market volatility and saw the central bank breaking new ground in helping out the banking sector.

'This is basically Father Christmas to those who have access,' said Erik Nielsen, economist at Goldman Sachs. 'They are bailing out people who have not really adjusted their balance sheets to the new reality.' But Julian Callow, economist at Barclays Capital in London, said the funds injected today would later be 'mopped up' by the ECB, which was 'simply doing their job at being lender of last resort'.

The ECB had already announced that today’s regular weekly money market operation would mature on January 4 – covering the year-end when financial institutions will be under pressure to show strong liquidity on their books.