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Homeeuropean central bankECB risks undermining QE if it opts for compromise plan

ECB risks undermining QE if it opts for compromise plan

The ECB is considering three main options for pumping money into the struggling euro zone economy but two of them could hurt confidence in the bloc's most indebted states, defeating the object of the exercise.

With euro zone consumer prices falling in December, for financial markets it's no longer a question of whether the European Central Bank will act to boost economic growth and ward off a deflationary spiral, but when.

President Mario Draghi may announce an ECB program of buying government bonds, using newly printed money intended to flood the wider economy, as soon as the Governing Council's next policy meeting on Jan. 22.

The main scenario for markets is that the ECB will join its U.S., Japanese and British peers in launching quantitative easing (QE) by buying government bonds in amounts proportionate to each euro zone state's shareholding in the bank.

But objections from the Germany's Bundesbank to the ECB taking on sovereign credit risk have raised two compromise solutions, as suggested by recent comments from ECB chief economist Peter Praet.

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