Leading indicators are heading south. European industry may soon slip into a mild recession. The standard forecasts of a good 2 percent growth for Germany and even 2.5 percent for the euro zone this year will probably have to be revised down again. Of course, the unexpectedly sharp slump in the United States has contributed significantly to Europe's downturn. The ECB finally cut its key interest rate by a quarter point to 4.5 percent 10 days ago.
More steps are likely to follow within the next six months.
Coming economic news will probably be rather weak. The real issue now is how far the ECB should go. Many pundits call for more rate cuts until a new upswing has clearly started. But as rate moves work only with a lag, such a policy would lead a bank to cut rates for too long and by too much in the meantime. A look at present economic data thus does not suffice to steer monetary policy.