These guys are really insane:
The European Central Bank offered new emergency loans to banks on Thursday to help them through the turmoil of the government debt crisis, but decided to keep interest rates on hold despite fears of an economic slowdown.
President Jean-Claude Trichet did not even indicate that a rate cut was due in coming months, as many experts predicted would be necessary to stave off a possible new recession. The hesitation is likely to expose the bank to more calls from worried businesses to change course.
The basic story here is that when the ECB tightened money several months ago, a wide range of observers noted that this was a reckless action that was likely to tip at least southern Europe into recession and worsen the Eurozone’s sovereign debt problems. Well, tighter money worsened the growth outlook for Spain and Italy causing the sovereign debt problems to get much worse, and now the whole Eurozone’s on recession watch. The correct thing to do when you make a widely criticized move and then bad things happen is to reverse yourself. But to reverse himself at this point would entail implicitly admitting that he was wrong in the first place. And VIPs don’t like to admit that they were wrong. So now a few hundred million people need to suffer the consequences.
Kantoos has more on this.