IN DECEMBER, The Economistwarned that without dramatic intervention the euro zone could face a new depression. Soon after, the European Central Bank sprang into action, averting an immediate financial meltdown through heavy lending to banks. The resulting calm looked like an opportunity for euro-area leaders to seize the moment and escape, once and for all, from crisis. Instead, complacency set in. The ECB's financial anaesthetic has not prevented a steady economic deterioration that now threatens to engulf—and perhaps end—the euro zone.

Across the euro area, unemployment is worsening. The unemployment rate touched a new record high in March: 10.9%, up a full percentage point from the prior year.

Of course, the pain is not evenly distributed. It is low and reasonably steady in the north but high and climbing in the south. Youth unemployment rates are staggering—over 50% in Greece and Spain, 36% in Portugal and Italy, rising sharply in all four. There is worse to come. Manufacturing activity is slowing sharply across the euro area, and the core is no longer immune:

The details of these reports are most worrying. April's decline was stunning, but new order inflows tumbled at the fastest pace since December. The job decline in manufacturing is now impacting Germany and France. The picture is distressing. It is not surprising. The euro-zone economy is large and overwhelmingly driven by domestic demand. That demand has been steadily squeezed by a broad, sustained fiscal tightening. Monetary policy is providing almost no relief. The ECB raised rates last year, and while it has since unwound the 50-basis-point increase from 2011, it shows no interest in cutting rates further below the present 1% level. Quantitative easing looks out of the question. The ECB's extraordinary lending to banks seems to have stabilised bank-financing conditions; it does not appear to have prevented a sharp slowdown in lending to the private sector. There was no way to avoid a return to recession amid such circumstances. Ordinarily, of course, policymakers would react to this deterioration by taking steps to stabilise the economy. What is most frightening about the euro-area picture is that this is not happening. For now, austerity remains the rule. Despite the nastiness of the economic picture, the ECB is widely expected to take no action at its meeting tomorrow. The euro area is walking, eyes wide open, into depression. Led by its periphery, which is already there. Most everyone seems to have convinced themselves that this sort of thing isn't so bad, so long as a Lehman-like financial collapse is avoided. It isn't. Nothing good will come of a euro-zone depression.

If, when all of this is said and done, the euro zone descends into a chaotic, costly break-up, many people will write that such a thing was inevitable, unavoidable. They'll be wrong. We are watching causation this very moment: institutions that know how and why to prevent things from falling apart and which nonetheless sit back and do nothing.