With more investors and consumers concerned over the Recession 2013 threat, Europe and China today (Thursday) took action to motivate their sluggish economies and prevent a drastic global slowdown.
It hasn't even been a week since a crucial European summit provided a blueprint for the 17-member Eurozone to pull out of its debt crisis. But already the rally that immediately followed has fizzled. At issue is how European leaders will work out the tricky details for a central banking authority and the expanded use of bailout funds.
Now the European Central Bank (ECB) doesn't have much left in its arsenal to calm fears of a broad economic slowdown in the region. It used one of its last tools Thursday when it slashed its benchmark lending rate by 0.25 percentage points to 0.75%, the lowest level since 1999, when the euro was created.
At this level, the ECB hopes that bankers be more willing to lend and also that investors will open their wallets wider.
ECB President Mario Draghi noted in a press conference following the group's decision that the move was made independently of China's decision to cut rates.
"There wasn't any co-ordination that went beyond the normal exchange of views on the state of the business cycle...economy...or global demand," said Draghi.
Draghi stressed that the cut wasn't aimed to help an individual country, but to assist the entire struggling region.
"We can genuinely say that this measure is addressed to the whole of the euro area, and not only to specific countries," he said.
Reiterating that markets haven't felt the full effect of the ECB's recent moves to increase liquidity, Draghi also cautioned that the bank could only do so much. Draghi said the central bank couldn't do more than it already had to encourage people to borrow or invest.
"Credit is now led predominantly by demand, and if demand is weak, you wouldn't expect string credit growth," Draghi added.