A step in the right direction

The first meeting of the European Central Bank's board of directors led by its new president, Mario Draghi, on Thursday took the step of reducing the euro zone's benchmark interest rate by a quarter of a percentage point to 1.25 percent. Draghi acknowledged that Europe was headed into recession, and he argued that growth would be much lower than expected next year ? offering hope that the bank would cut rates again next month.

The decision is to be welcomed, but it only partially corrects the errors of the past: three increases at the most dangerous moments of the current crisis, placing borrowing rates at levels higher than those in most of the world's other developed economies. Inflation in the medium term has never been a major threat beyond the cyclical peaks in the price of some raw materials. Consumption, the main determinant in sending prices up or down, has consistently fallen in recent months. Business confidence is at historic lows, increasing the risk of a double dip in some of the major economies, among them Spain's, where stagnation, rising unemployment ? now close to 4.5 million ? and vulnerability to differentials in the debt market remain.

The ECB should have lowered interest rates a long time ago. It should have done so under the mandate of Jean-Claude Trichet, who should have assumed responsibility for his mistakes and corrected them. The impression that the ECB is "behind the curve," that it is only able to respond to events, rather than influencing them, has not been substantially changed by the new president. He now faces the challenge of managing the bank at a time when the breakup of the euro zone, or at least the departure of one or more members, is no longer unthinkable. The continued tension in the markets is in large measure attributable to the clear inability of the single-currency's member states to handle the crisis. What it should be making clear at the moment is that the preservation of the euro is more important than the pointless sacrifice of those states that are required to undergo harsh adjustment programs or to renegotiate their public debt.

Reordering public financing is necessary, but a far more urgent task is to bring an end to the deadly combination of bankruptcy, economic decline, and rising unemployment that some countries face. To avoid that scenario spreading further throughout the euro-zone, the ECB needs to be much more ready to act than it has so far shown. It now needs to extend its program of buying public debt from countries threatened by the international money markets. Surely the ECB can see that its own existence is now at stake.