Europe must "do more" to restore liquidity than yesterday's unprecedented, interest-rate cut by central banks, Austin Hughes, chief economist with IIB Bank, Dublin, a unit of $422-billion, global Top 50 KCB Bank, Brussels, told BS&T. For the first time ever, central banks around the world yesterday made a coordinated rate cut. The European Central Bank, the U.S. Federal Reserve and the Bank of England, were joined by the central banks of Canada, Sweden, China and Switzerland in cutting their benchmark overnight rates.
Neither this cut, nor a declaration to protect consumers' deposits by successive European governments—starting with Ireland last Sunday night (Oct. 5)"are enough to free up credit, Mr. Hughes said. "The log jam is still in the money markets," he said, although adding, "the cut will help".
The U.S. has also urged further action from European central bankers, who are to meet their counterparts from the Federal Reserve in Washington this weekend.
"There has been less boldness, less imagination and less coherence in the European response to the financial crisis," Mr. Hughes said. In part, he says this is because disparate, national systems make it hard for Europe to act as one, as the U.S. did in making a $700-billion plus bailout available last Friday (Oct. 3).
"There's also an element of denial in Europe," Hughes says. "There were comments by members of the European Central Bank the week before last saying the credit crisis hasn't reached Europe, which, given the travails since, is flabbergasting."
There has been bickering this week among EU members and other European countries. Countries, such as Germany, criticized Ireland and Greece at the weekend for allegedly positioning themselves to advantage by guaranteeing deposits. Germany since issued its own guarantee. Meanwhile, Britain is suing Iceland, which declared bankruptcy on Sunday night, leaving British depositors in failed Icelandic banks seemingly out of pocket.