ECB cuts interest rate by .25%

European growth is expected to slow to near or below zero in the last three months of the year.

Uncertainty from Europe’s debt crisis is a factor. Business and consumers are reluctant to spend and investors because they fear more financial turmoil if Greece defaults on its debts.

Now markets are waiting for Mr Draghi’s first news conference to see if he indicates the bank is willing to intervene more forcefully in bond markets to keep Greece’s troubles from spreading to Spain and Italy.

At home, Finance Minister Michael Noonan said that the rate cut must be passed on by banks and building societies.

"I am very pleased that they have announced it," Minister Noonan said. "I thought it wouldn't happen for another month or so.

"I hope it's the first rate cut in a series of three - I think the European economy could do with the injection of a three-quarter per cent rate cut between now and early in the new year.

"Obviously the banks should pass it on," he added.

"It will automatically pass with trackers (mortgages), but I think the Regulator Matthew Elderfield has already made it clear that he will intervene if he thinks that rate cuts in Europe are being absorbed by the banks rather than being passed on to customers."

Sinn Féin finance spokesperson Pearse Doherty called on Irish financial institutions to pass on the decrease to mortgage holders immediately.

“While the decrease is to be welcomed, it will do little to deal with the problem of widespread mortgage distress," Deputy Doherty said.

“The issue was highlighted by the Keane Report, but the government has taken no effective action since its publication,” the Donegal TD concluded.

Fianna Fáil Finance Spokesman Michael McGrath described the move as being “of benefit to the European economy as well as people in difficulty with mortgages and other debts.”

“A swift response from banks to today’s ECB rate cut will go some way to easing the stress being felt by thousands of families," Deputy McGrath said.

"However if the banks fail to act the Minister and the Financial Regulator will have to step in to ensure the public and not just the banks benefit from the rate reduction.”

Also commenting on the decision, ISME Chief Executive Mark Fielding said the reduction in rates "will only be effective if the lending institutions pass on the benefit in full, instead of their usual foot-dragging, maintaining the benefit for themselves instead of their customers”.

“If the banks refuse to do the right thing and fail to pass on the interest rate cut in full, the Government must compel them to do so, by introducing stiff sanctions," Mr Fielding said.