I am puzzled by the idea that lowering US interest rates is bad for the Euro. That is the case if rate cuts revive the US economy, keeping the US as the favored destination for capital. But if the economy is not revived, then declining asset values coupled with lower rates of return could result in money leaving US dollar-denominated assets. In that case, the US dollar would decline and the huge US trade deficit could make the drop in the dollar very steep, compounding the problem. I'm just suggesting that there are many ways that the future can play out. Rather than deflation, stagflation is a possibility, with emphasis on stagnation, and with inflation coming in through a lower dollar.