Tumbling stock markets and credit crunches always unnerve. Familiar fears rush in: of expanding waves of financial distress causing weak countries and firms to flounder, of a crippled real economy and, above all, of events stampeding out of control.

Voters want their governments to do something. Those demands can create a trap that is perhaps the biggest danger in any market slide. At first, governments have mostly avoided the “beggar thy neighbour” policies that helped cause the Great Depression. In Europe, old nationalistic sins were not revisited because of wise past decisions, in particular the creation of the euro and single European market. The European Central Bank has provided almost unlimited liquidity to eurozone financial systems. The stability pact has been relaxed so that governments can borrow all they need to recapitalise their banks. Eurozone members have thus been spared confronting a currency crisis and competitive devaluations as they resolve the banking crisis.