European borrowers have been given an early Christmas present in the form of interest rate cuts, designed to boost spending and turn around the ailing economy. The Eurozone has technically entered its first recession after figures showed two consecutive quarterly contractions and the trend looks set to continue well into next year. That was the European Central Bank’s justification for today’s record 0.75 percent interest rate cut. ECB President Jean-Claude Trichet told a press conference in Brussels: “Largely related to the effects of the intensification and broadening of the financial turmoil, both global demand and Euro area demand are likely to be dampened for a protracted period of time.”
The European Commission president believes that while each individual economy is different, collective strength requires unity: “Some countries will have four percent growth this year whilst others are in recession. Co-ordination is needed to avoid negative effects and if possible to maximise the positive effects,” Jose Manuel Barroso told the European Parliament. European central banks outside the Euro-currency have also slashed interest rates. The Bank of England chopped off another full percentage point, to a two-percent rate not seen for over fifty years. And Swedish rates were put to the sword in spectacular fashion by the Riksbank, which set the tone for the day with an unprecedented 1.75 percent cut. Its new two percent level is expected to last for a while whereas elsewhere in Europe more cuts could follow soon if needs be.