WHILE the US economic recovery is gaining traction and Japan has at least beaten deflation and looks set for positive growth, Europe has emerged as the weakest major link in the global economy. Economic recovery there has stalled and even the largest economy on the continent, Germany, contracted in the second quarter. Inflation in the eurozone is running at a five-year low of 0.3 per cent and deflation is a real and present danger.

Thus all eyes will be on the European Central Bank (ECB), which is due to decide on interest rate policy at the meeting of its Governing Council tomorrow. Hopefully, it will act decisively, if not radically, to ease further.

If the words of ECB president Mario Draghi are any guide, there is reason for hope. During his speech to the central bankers' meeting at Jackson Hole on Aug 22, Mr Draghi was very clear about what he would like to see happen. Significantly, he focused much of his speech on unemployment, which is arguably the No 1 scourge of Europe. While US unemployment has fallen to 6.2 per cent from 10 per cent during the height of the global financial crisis in 2009, European Union unemployment has remained stubbornly high at 11.5 per cent, just a shade below its peak of 12 per cent last year.