September 4, 2014

IT WAS a coincidence that the European Central Bank held its regular policy-making meeting at the same time that leaders of the North Atlantic Treaty Organization were assembling in Wales. There is a connection between the two events, however: An economically weak Europe cannot be a diplomatically and militarily strong Europe. Among other things, its business leaders would be more likely to fear the fallout if Russia responds in kind to stiffer Western economic sanctions on Moscow. And, of course, the ECB has a lot to say about how rapidly, if ever, Europe escapes its current economic funk.

On Thursday, the central bank’s president, Mario Draghi, took new steps to address those economic woes. He slashed the key interest rate to near 0 percent and announced a program of securities purchases, to begin in October, with the stated goal of expanding the ECB’s balance sheet — which shrank over the past two years — and easing credit across Europe. The unstated goal is to weaken the euro on international currency markets so that Europe can sell more exports, especially from struggling nations such as Spain and Italy. Mr. Draghi was reacting to a rash of dire economic data showing that Europe was slipping dangerously close to deflation.

Aggressive as it was, compared with past ECB actions, Mr. Draghi’s new policy remains a far cry from the unconventional quantitative easing that the Federal Reserve and Bank of England employed to rekindle growth. The only bonds the ECB buys for now will be high-grade securities backed by real estate and corporate loans — not government bonds, as the Fed has done. That would be anathema to Germany, whose national wealth backstops the ECB and whose representative on the central bank reportedly objected even to Mr. Draghi’s more limited balance-sheet expansion. Germany is still deeply committed to a solution based on budgetary discipline and structural reform in heavily indebted countries.

Mr. Draghi favors structural reform, too, but his fears about the lack of progress under current policy seem to be growing. “The recovery was losing momentum,” he said Thursday, which is central-bank-speak for “we’re in big trouble.” In that sense, his latest moves may be seen less as tangible policy changes and more as a cry for help — a warning both to debtor governments and their German paymasters. The former need to reform and the latter need to rethink their fixation on budget-balancing. It’s a message that all concerned would be wise to heed, because another implication of Mr. Draghi’s latest step is that the ECB alone cannot save them.

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