-Biagio Bossone and Richard Wood
Today is a critical day, which may mark a change in the ECB's history, as the central bank is widely expected to embark on broad-based quantitative easing in order to shield the region's economy from deflation and revive the sluggish growth. Analysts expect a programme of sovereign-bond purchases to account for around 500 billion euros, others see the volume of 600-700 billion euro. Whatever the scale of QE will be, anything less would be likely a disappointment for markets. It is also predicted that purchases of sovereign debt will not be conducted under usual risk-sharing arrangements, whereby 19 national central banks share any losses in rough proportion to their economies' size, making the Bundesbank to shoulder a quarter of any losses incurred by the ECB. In this instance, each central bank is likely to be responsible for buying bonds of its own country and will have to bear any losses on them on its own.
Some experts doubt effectiveness of the ECB's programme in comparison to asset purchases schemes undertaken in other countries including the US, UK and to a lesser extent Japan. One of critics is ex-President of Bundesbank Axel Weber, who believe that the Euro zone's inflation will remain below the ECB's targeted level for a prolonged period of time, regardless of ECB President Mario Draghi attempts to boost consumer prices. Weber also is pessimistic about the Euro region's economic growth prospects.
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