Europe has signaled as clearly as it can that it will take a more measured approach to dealing with the global financial crisis than its Anglo-Saxon cousins. That’s a polite way of saying they are increasingly behind the curve. Trichet signaled in a newspaper interview released today that the ECB may pause its rate cutting campaign in January. Germany has been pilloried for dragging its feet on fiscal stimulus to the point where the Managing director took them to task yesterday, criticizing the reliance on EU budget rules to avoid taking the dramatic actions necessary to ward off a prolonged downturn.
Short-term, Trichet’s go-slow approach may support the single currency but amid a slowdown in which manufacturing PMI are in the mid-30s, it is hard to see these gains being sustained.
