While the United States, the UK and nations around the world have already moved to cut rates in recent months, the Bundesbank had been holding out.

Now it has accepted the world view that monetary policy should now switch from a priority of combating inflation to one of boosting economic growth.

Growth fears

Whether the cuts are enough to boost growth remains to be seen.

Governments, market analysts and agencies like the International Monetary Fund and the Organisation of Economic Co-operation and Development have hastily downgraded growth forecasts for 1999 with eurozone growth expected to fall below 3%. While respectable, local surveys of confidence suggest a much worse picture.

In cutting rates now, eurozone central banks have broken an agreed timetable to converge rates after the single currency is launched.

This suggests central bankers now see their economies slowing much faster than they thought, prompting their action.

Jobs question

Unemployment is also an issue. The left of centre governments now dominating the currency zone want to see something done about the high jobless rate, stuck above 10%.

However, central bankers have long said that interest rate reductions can only hope to offer partial help here. An overhaul of the labour market to boost training and flexible workplaces the real key.

While wanting a growth boost, clearly the monetary authorities aren't banking on these cuts doing much for Europe's jobless millions.

Eurozone disparity

The cut again highlights the the problems of forcing the same economic settings across the widely-varying economies of the euro single currency zone.

Cutting rates reflects the conditions in the dominant nations like Germany and France where growth is modest and inflation well and truly in check.

But in the second-line eurozone nations, Ireland, Spain and Portugal, growth is strong.

Ireland, with a growth rate approaching 10%, hardly needs a rate cut to boost its economy and will find it harder to control inflation.

Currency questions

Surprisingly, the move is likely to strengthen the value of the euro against the US dollar and the pound.

A drop in interest rates usually sees a fall in value of the currency in the country concerned. Investors tend to move overseas looking for better returns in higher interest rate nations.

However there are signs that the euro will be a strong currency against the dollar or the pound as it will be backed by healthy growth in eurozone economies.