Does Europe still have a disinflationary bias?

Even though the eurozone has left the six quarter long double-dip recession behind, the region is likely to be faced with an unemployment rate of around 12% and an inflation rate well below 2% for at least another six quarters.

If the Federal Reserve had been presented with such numbers, it would be throwing everything including the kitchen sink at the problem to reduce the risk the US would end up in a Japan scenario. The real question is not why the ECB cut rates in November, but rather why it did not act sooner and more forcefully. The answer probably contains many elements, ranging from the belief held by some that a large part of the unemployment rate could be structural, the need to keep the heat on politicians to reform further. Nevertheless, internal Governing Council politics probably also played...