LONDON -- Stock markets rallied after the European Central Bank embraced quantitative easing, but this feel-good moment represents a mere breather for the global economy in its pursuit of stable growth.
The ECB has taken eurozone monetary policy into uncharted territory. President Mario Draghi, the impetus behind Thursday's decision to begin buying eurozone government debt, fears that the bloc will succumb to the kind of deflation that has ravaged Japan for 20 years.
The euro has fallen in value from a peak of more than $1.60 reached before the 2008 Lehman Brothers collapse to slightly more than $1.10. The Ukraine crisis, instability in the Middle East and other geopolitical risks on the eurozone's edges are clouding the future of its single currency. Germany's Bundesbank has warned that quantitative easing would only undermine confidence in the euro.
In a sign of anxiety, the Bundesbank has been busily repatriating bullion stored at foreign central banks. It transferred 85 tons of gold last year from the Federal Reserve Bank of New York and 35 tons from Banque de France in Paris to its own cavernous vaults in Frankfurt.
The jury is still out on quantitative easing. The U.S. Federal Reserve ended its bond-buying program last year; Chair Janet Yellen and her colleagues are pondering when to raise interest rates on America's resurgent economy. In Tokyo, Bank of Japan Gov. Haruhiko Kuroda is still trying to keep the first arrow of Abenomics -- monetary stimulus -- on target.
Meanwhile, international trade is slowing again -- a worrying sign for the global economy. The World Trade Organization has lowered its forecast for 2015 growth in trade volume from 5.3% to 4%. Trade had been recovering from a nasty fall after the 2008 financial crisis. It is now backsliding.
Global trade grew at a slower pace than the world economy as a whole in 2012 and 2013, note economists Emine Boz of the International Monetary Fund and Matthieu Bussiere and Clement Marsilli of Banque de France. They posit that this slowdown may have structural causes, such as rising protectionism and geographic shifts in production. For the eurozone, a sluggish Russian economy weighs on trade.
One of the European Union's greatest strengths, the free movement of people, is now being called into question amid a spate of terrorist attacks. If cross-border flows of goods and people dry up, investment will suffer the consequences.
In Greece, the anti-austerity Coalition of the Radical Left is expected to win a parliamentary election Sunday. Should a new government in Athens brazenly threaten to leave the eurozone, the relief produced by the ECB's commitment to quantitative easing will quickly give way to new anxiety.
Lower energy costs, a product of the precipitous fall in the price of crude oil, unquestionably benefit the global economy. Nations ought to take advantage of this windfall to work through a backlog of structural reforms. Greece and other lagging eurozone economies urgently need to tackle their budget deficits and free up their labor markets to reduce chronically high unemployment. Japan finds itself in a similar situation. Halting runaway growth in spending on state-run health care would be a step toward putting its fiscal house in order.