ECB unlikely to change rates

The European Central Bank is unlikely to cut interest rates, though investors hope for them. Garganas says inflation is too high of a concern here.

The European Central Bank is not willing to do as investors hope and cut interest rates. There is little doubt that the central bank needs to focus on increasing inflation throughout the Union.

According to Nicholas Garganas, who is head of the Greek Central Bank, "Our monetary policy is not led on what the markets expect," as reported by Bloomberg News. He continues, "I'm very concerned about the high inflation rate. Inflation risks remain on the upside."

Investors believe that at some point, the ECB will need to follow US Federal Reserve lead and have to cut rates. They believe it will be necessary as the US housing slump hurts the region.

Yet, inflation is too high with it currently sitting at its highest rate in 14 years.

The European Union faces several problems including problems with a tight credit market. It also has a strong euro in place. In Germany, rising costs of labour are a large concern. In Spain, the property markets are falling fast. More so, Britain is facing a painful credit crunch. Additionally, it is coming to light that Britain is likely to suffer the same type of subprime housing crisis that they US is, on their own soil.

While some of what is happening here has been blamed on the US economic slowdown, many of the EU's problems are caused by a weakening situation within Europe itself.

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