Last week's rate cut from the Bank of England, which brought base rates down to 5 per cent, the lowest since 1964, and the 2 3/4 percentage points the US Federal Reserve has trimmed off rates so far this year are both aimed at one thing only - to get their economies moving again.

The move in Britain surprised many experts and the moves in the US since January have certainly been aggressive. However, there is another ailing economic region closer to us that is slipping fast and has seen little or no policy response to date.

Economic growth in Europe this year is likely to come in below 2 per cent. At the start of this year, many forecasters were looking for growth in excess of 3 per cent from the euro-zone economies. European growth was forecast to be significantly superior to elsewhere.

This is no longer the case. Expectations have been reined in. While 2 per cent growth is by no means a recession, the decline has been quite precipitous in recent months.

The economic data out of the euro zone have been poor. The widely watched monthly German Ifo survey of business confidence, has declined on 12 occasions in the past 13 months. Purchasing managers in Europe have also signalled a slowdown in each of the past 15 months.

The bad news is not just confined to survey data. The most recent industrial production figures for Europe point to a fall on a year-on-year basis. This is despite the benefits accruing to manufacturing exports from what has been, until recently, a tumbling euro.

In the US, a fairly resilient consumer has to an extent offset a weak industrial sector. This is less so the case in Europe. Euro-zone retail sales are almost at the same levels as they were 12 months ago.

Consumers should perhaps have been buoyed by the tax cuts that we have seen in Germany and elsewhere. However, a significant proportion of the value of those tax cuts has been wiped out by increased food and energy prices, as both foot-and-mouth and higher OPEC prices have reduced true discretionary disposable income.

It's been tough and company profits have mirrored this. Forecasts of 10 to 15 per cent profits growth for the year have been scaled back to slightly better than flat. There have been severe profit warnings from blue-chip companies such as Bayer, KLM and Alcatel.

While the Euro-wide rate of unemployment has been relatively stable at 8.3 per cent, we have seen an upward movement in the unemployment rate in Germany and France.

German unemployment now stands at just under four million, or 9.3 per cent of the workforce. Chancellor Mr Gerhard Schr÷der will struggle to achieve his goal of bringing joblessness below 3.5 million by the end of 2002.

So why hasn't the European Central Bank (ECB) responded to this economic weakness?

Well, it's not its job - or it's certainly not how it sees its job. The ECB is focused only on price stability - i.e., keeping the growth in prices to below 2 per cent.

Other central banks such as the US Federal Reserve are also charged with maintaining employment levels and keeping an eye to the overall financial system. But the ECB's only goal is price stability. This single focus has led the ECB to be the least active of the major central banks this year, with a solitary cut of 25 basis points announced in May.

So will the ECB continue to focus exclusively on price stability - or will the realpolitik of a slowing Europe force them to take a broader view?

Certainly it will not feel under any obligation to do so. It may argue, for example, that today's zone-wide inflation rate of 3 per cent is unlikely to move towards the 2 per cent comfort level for another 18 months. However, it won't be able to deny that the move downwards is on (and will likely accelerate as energy price effect gets washed out of the data and the impact of the foot-and-mouth crisis wanes).

But no institution can forever ignore the political and economic reality in which it operates. The ECB may be coming to the conclusion that a nod in the direction of the wider community over the coming weeks would be the wisest course of action in the long term.

Eugene Kiernan is head of asset allocation at Irish Life Investment Managers