Eurozone crisis live: Mario Draghi urges no let-up in austerity reforms The ECB's governing council faces a tricky dilemma today. There are plenty of reasons to ease monetary policy (this morning's weak manufacturing data is just the latest), which is why a rate cut is pencilled in. But that alone will not a) cheer the markets, and b) (more importantly) provide much of a stimulatory boost to the eurozone. Firms who are struggling to stay afloat in Italy or Spain, for example, are not suddenly going to take out expansionary loans on the back of a quarter-point rate cut. And banks with unrecognised bad debts in the vault aren't going to suddenly stop hoarding capital either. As Carsten Brzeski, senior economist at ING, puts it: Data released since the April rate-setting meeting have provided further evidence that more monetary action could be needed in the euro zone... But as long as the transmission mechanism is not working, a rate cut could simply go up in smoke. Which is why several City anaysts believe Draghi may announce new measures to help small firms who do want to borrow. Other options in the toolkit include full-blown quantitative easing (don't get your hopes up) or 'verbal' intervention -- basically Draghi telling us all how long he thinks rates might stay at current levels. It is worth remembering that Draghi has already stabilised the eurozone and dragged down peripheral bond yields in his tenure as ECB president. That recovery, though, has still not made its way to the streets, homes and offices of the euro area, Kit Juckes of Société Générale sums it up (typically) well: The bottom line on the ECB today is that the real world is a different place from the fantasy world of markets. And the ECB has done a far, far better job of curing the market world than the real one. That is to say, we have a steady currency, tight spreads, low yields, and equity markets that are up on the year. Now, Mario, you need to tackle the real world's woes of recession, impending deflation, and catastrophic unemployment. And that is far, far harder... Re-Define's Sony Kapoor agrees that a rate cut is not enough: While Marc Ostwald of Monument Securities reckons the ECB will leave rates unchanged, as it hasn't finished preparing the unconventional measures it wants to deploy alongside it: The rationale is simple...a rate cut will do nothing to help the distressed peripheral economies (or indeed Germany), given the monetary transmission mechanism remains severely impaired...as such the ECB needs to find some further 'unconventional measures' to try and enhance the efficacy of a refi rate cut, and comments from various ECB officials (above all Constancio and Asmussen) last week made it clear that the process of coming up with such measures is by no means complete.