Central banks' move will buy time for some serious European action
THE joint move by the world's leading central banks to make it easier and cheaper for banks to borrow from them will not solve the eurozone crisis.
But it might buy time for Europe's leaders finally to take serious measures to solve it, before a full-scale banking crisis makes their efforts pointless.
A eurozone banking crunch is already well under way. It has all the familiar patterns of 2008.
Banks are worried, not just about their own exposure to troubled eurozone states and the euro economy in general, but about the exposure of other banks.
So they hoard their own cash, and are reluctant to lend to other banks that need funds to make loans, or cover existing ones. In the jargon, "liquidity dries up".
As it does, the cost for banks to borrow rises.
The rate for European banks borrowing dollars is at the highest level in three years.
The stresses in the banking system were also reflected in the decision by ratings agency Standard & Poor's to downgrade some of the biggest names in global banking.
It was described as technical change, but it still makes borrowing more difficult and expensive.
These "funding" problems can lead to the sudden demise of banks that find they cannot replace existing loans due for repayment.
As we know from the events of September 2008, there can often be only a few days' warning of imminent bankruptcy. The central banks are trying to ensure that this does not happen. They may succeed.
As we also know in Ireland, central bank funds can keep even insolvent banks open.
But the central banks cannot restore confidence in the euro, or prevent a shortage of credit, which will shrink an already stagnant eurozone economy.
It was reported yesterday that the British regulator had told banks to draw up plans for a break-up of the euro. Only Europe's governments can prevent those plans being required.
They may not have much time left.