The regular flow of economic data this week will cast further light on the state of the euro zone economy. Indications from figures already published are far from encouraging. Earlier signs of an upturn in the big German and French economies have petered out. Last week the EU Commission forecast growth of just 1.7 per cent in the overall euro zone this year, but even this is now starting to look a bit optimistic.
There is a strong case for another cut in euro zone interest rates - in fact there has been for some months now - but the European Central Bank appears undecided on what to do. The risk is that it leaves it too late to cut borrowing costs again.
The ECB has been sending out mixed signals about interest rates over the past couple of weeks. There are clear indications of disagreement on its central council, with Mr Jean-Claude Trichet, its president, reportedly seeking a rate cut, but opposition coming from some members of the council. The outcome appears to be that the bank will wait and see how data shape up in the weeks ahead before deciding what to do.
It may all work out. There are signs that the US economic recovery is now gathering pace, with a strong 300,000 pick-up in employment last month assuaging fears that the weak jobs market could scupper the upturn. If US recovery accelerates, then the euro zone should benefit from increased export volumes. In turn this should boost employment and incomes in the euro zone and lead to the consumer spending recovery which is currently lacking.
The problem is that there are a lot of links in this chain and that even if they all work, there will be a delay before stronger US growth knocks on to the EU. Meanwhile there is a risk that consumer and business confidence wanes further, further slowing the already lacklustre economies at the centre of the EU. The ECB has little to lose by cutting interest rates, with inflationary pressures on the wane. However the risk of not doing so is now significant.
The one area where inflationary pressures are evident in some euro zone economies is asset prices. This is particularly the case in the Republic, where house prices continue to rise and mortgage borrowing is soaring. Similar trends in the UK have already persuaded the Bank of England to raise rates there.
The boom in the Irish property market does not look like coming to a shuddering halt over the next few months. Interest rates will remain low - or fall further - and the general outlook is for a gradual pick-up in growth. However the more prices and borrowing rise, the more the economy is vulnerable to any adverse economic shock. Unfortunately, there is little sign that either borrowers or lenders are taking these dangers on board. The euro zone economy needs an interest rate cut, but such a reduction would be the last thing that the Irish economy needs, as it would only add further impetus to the unsustainably rapid growth in the property market.