It is another nervous day on the trading floors in Europe as various European banks dropped interest rates again. The move is designed to address fears that Europe could get caught up in a deep and difficult recession, spanning all of 2009.
The European Central Bank cut interest rates by 0.75 percent - its biggest ever move and its third cut in two months.
Recent economic data in the 15-nation Eurozone has been grim and many European countries have been calling for this latest drop.
Elsewhere in Europe, even stronger medicine was administered. The Swedish Central Bank cut rates by 1.75 points - a record there. In London, the Bank of England dropped rates one percent to a level not seen since 1951.
Economist George Johns from Barclays Capital says the move has not come as a surprise to those in London's financial district.
"The city was expecting something in the region of a percentage point cut," he said. "That is what we got. I think looking ahead, we are going to see more decisive action from the bank and I would see rates falling perhaps another percentage point over the coming months to a one-percentage trough."
As is the case elsewhere in Europe, the British economy is stagnant and real estate, in particular, is taking a big hit. Throughout Britain, home foreclosures are increasing and mortgage lending is down a massive 70 percent from one year ago.
Michael Coogan from the Council of Mortgage Lenders says the hope is most of this latest cut will be passed on to help get the property market moving again, but as he points out, there is also a downside for savers.
"I think where lenders can pass it on to borrowers they will," he said. "But actually the moral obligation to the very many savers who rely on investment income, charities similarly, they are going to want their savings rate to be kept up. And indeed for economic purposes, we want savings rates to be kept up to encourage savings because it is the savings money that can be lent out next year."
Beside the interest rate drops, the markets here were again influenced by a series of job cuts.
Banking giant Credit Suisse announced it is eliminating another 5,300 jobs after revealing a net loss of $2.5 billion in October and November.
In London, the Japanese financial group Nomura says it will cut up to 1,000 jobs in its British operation. Earlier this year, Nomura bought parts of the failed U.S. bank, Lehman Brothers.
News
