Don't Jump Onto Europe's Bandwagon

Recent stirrings of optimism about Europe’s economy have been interrupted: New jobs figures and signs of a slide into deflation have ended some premature celebrations. The region’s economic crisis isn’t over. The danger of a relapse into recession is real.

The U.S. Federal Reserve and (belatedly) the Bank of Japan are buying assets on an enormous scale with the aim of lowering long-term interest rates. This quantitative easing has risks, but in both cases the evidence suggests it has worked. The European Central Bank, though, has largely refrained. It bought bonds at the height of the crisis but neutralized the effect of the transactions on the money supply. It also undertook a big program of short-term lending to banks, but that’s winding down. No doubt there are legal and, above all, political impediments in the European Union to Fed-style asset purchases, but these must be overcome, and the ECB is best-placed to make the argument.