Eurozone Quickly Revisited

With industrial output only marginally above 2010 and price deflation a couple of clicks away,
The ECB countered today by cutting rates, suspending sterilization of basic monetary liquidity
and via targeting more asset purchases and steps to make more credit available to smaller,
growing firms. All to the good because the steps increase liquidity that was on its way down
from modest positive levels. These moves are also designed to undercut support for the
Euro. Maybe these steps will postpone the development of dangerous deflationary pressures
by leading to an improvement in economic demand levels, but unless we see production growth
re-accelerate markedly, destabilizing social and political measures will intensify further.

The Eurozone stock market is getting overbought in the near term, as players have been
anticipating ECB easing action. But there could be more follow through in the near term
especially if business confidence responds just ahead because the ECB comes to be seen
as providing substantive cumulative support.