Once again the European Central Bank appears to have nodded off. Wim Duisenberg, ECB president, argues that an interest rate cut on Thursday would have seemed panicky. That is not how the Federal Reserve and Bank of England appeared when they cut rates recently. With eurozone inflation making a beeline towards the ECB's comfort zone below 2 per cent, it could quite easily have got away with a 25 basis point cut without spooking anyone.

Its wake-up call will come soon: almost all the risks to the eurozone economies are on the downside, as the ECB vaguely acknowledged. European stock markets may have performed strongly since September 11 but that is a fragile foundation for a belief that confidence will withstand the US terror attacks. It is more likely that they will snuff out the spark of momentum that flickered in the German industrial sector in August. Unemployment is on the rise: Credit Suisse First Boston calculates that 40,000 job cuts were announced in the region in September. That will compound the impact of terrorism on consumer confidence. Meanwhile, foreign trade, which had powered economic growth since 1999, will be of no help with the US and Asian economies in a trough.

On a consoling note, the ECB issued a sensible view of fiscal policy. In a downturn, there should be some flexibility with budgets, without the need for immediate "countervailing" actions. But unless it cuts interest rates further, it risks spurring governments to loosen more than they would otherwise have needed to.