WSJ: In Europe, Fear Hasn't Spread - by Joelleen Perry
In Europe, Fear Hasn't Spread - by Joelleen Perry
The fear of financial crisis gripping U.S. monetary policy makers doesn't appear to have spread to Europe. But a deeper rout in the dollar, signs of a sharp slowdown in European growth or evidence that a big European bank is in trouble could push European central banks toward similarly aggressive moves to those happening stateside. Amid the Federal Reserve's efforts to shore up U.S. financial markets, European central banks yesterday were noticeable for their relative calm. With euro-zone credit market rates high -- but not spiking -- and inflation at a record, the European Central Bank refrained from extraordinary operations, as did the Swiss National Bank. In a relatively restrained move, the Bank of England injected £5 billion ($10.1 billion) into U.K. money markets.
The primary reason for the difference in approach: No European bank appears close to collapse. "For the moment, it doesn't appear that there's an imminent financial debacle in Europe, so there's no need" for European banks to follow in the Fed's footsteps, said Paul de Grauwe, an economics professor at the University of Leuven in Belgium. "But if that were to happen here, the ECB would, of course, drop all other objectives and aim, just as the Fed has, to keep the financial system afloat."
