Capitulation.

Whatever credibility the ECB had is now gone. We will now see if the Euro remains a viable currency or becomes the latest casualty of a system of governance that had problems from the start. Divorcing fiscal and monetary policy is not advisable to any putative currencies.

Trichet Engineers ECB `Regime Change' as Banks Totter (Update2)

By John Fraher
Oct. 9 (Bloomberg) -- European Central Bank President Jean-
Claude Trichet is opening up the floodgates as the credit crisis
threatens to cripple the region's banking system.
Traditionally slower than its global counterparts to shift
policy, the ECB yesterday cut interest rates for the first time in
five years, joining in a global round of reductions. Trichet
declined to rule out further steps and today offered banks
unlimited cash to help them cope with frozen markets. The ECB also
gave banks a record $100 billion in overnight loans.
``This is a regime change,'' said Robin Marshall, director of
international fixed income at NCL Smith & Williamson, who oversees
about $20 billion in assets. ``This is a significant day in which
they've gotten real about the financial crisis.''
Trichet and other central banks are scrambling to restore
confidence in the global financial system after the credit crunch
spread from the U.S., pushing up borrowing costs to records. The
need for action is especially acute in Europe after governments
failed to agree on a rescue package acceptable across the region.
The ECB lowered its key lending rate by half a point to 3.75
percent, erasing a quarter-point increase in July, as the 15-
nation euro region teetered on the brink of a recession.
Historic Day