Wednesday is decision day for the European Central Bank. At issue is how the E.C.B. should handle the latest euro zone banking and debt crisis.
In many ways the easy path for officials at the E.C.B. would be to save the economies with cuts in the benchmark interest rate to a historic low and/or to offer commercial banks a plethora number of low-interest loans. This worked to calm the panic months ago and improve the economic indicators, at least in the short term.
But the E.C.B. is also considering taking a strict, no intervention position. This approach is supported by those who say too much bailing out of euro zone banks and a too-generous monetary policy will send the wrong message to the region’s political leaders- that it is not really necessary to do the hard work of creating a more stable, economically viable euro zone economy.
“With the euro-area crisis deteriorating, there is a lot of pressure on the E.C.B. to act — but in our view it is unlikely to announce any specific new measure this Wednesday,” Silvio Peruzzo, an analyst at Royal Bank of Scotland.
“There is a difference between what we would like the E.C.B. to do and what will actually happen on Wednesday,” Jens Sondergaard, senior European economist at Nomura wrote. “We are not sure conditions across the euro area have deteriorated sufficiently for the E.C.B. to take action.”
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