DAVOS, Switzerland — The European Central Bank is widely expected Thursday to unleash an aggressive, $1 trillion shock-and-awe monetary stimulus program to shore up ailing economies across the eurozone.
The monetary policy shift, which would see the ECB buy sovereign bonds and other assets as part of a quantitative easing plan to stave off the looming threat of deflation and spur growth, mirrors central bank action already taken in the United States, the United Kingdom and Japan.
Two weeks ago, prices in the eurozone fell for the first time in five years.
Such a move would inject large amounts of money into the financial system that could then used by banks and other lenders to increase available credit. That in turn can lead to more consumer spending and act as a jolt to economic growth.
While the American economy saw resurgent expansion in the third quarter — enlarging 5% — the major European economies of Germany, France, Spain, Italy and others have seen little growth since the financial crisis first began in 2008.
Ahead of the announcement, the ECB decided to leave benchmark interest rates, the cost of borrowing at the central bank, at 0.05%.
The ECB's announcement nonetheless is expected to contain some variables because Germany strongly opposes, both politically and economically, a stimulus that would uniformly applied to the 19 nations that share the euro currency.
Germany is frustrated at what it sees as spending profligacy as well as a lack of structural reforms in some southern European nations, such as Italy, Spain and Greece. It also harbors entrenched historical fears of inflation and has been reluctant to endorse monetary policy that could lead to rising prices. German Chancellor Angela Merkel is thought to favor a version of the program that would require individual nations to be responsible for their own national bonds in the event of default.
The decision is further complicated by upcoming Greek elections this weekend. A recent report by Der Spiegel in Germany magazine suggested that if Greece's hard-left Syriza party wins that election — it is currently leading in the polls — and demands, as expected, major concessions on its debt payments to the European Commission, ECB and the International Monetary Fund, then Merkel would prefer to let Greece leave the eurozone in a so-called "Grexit."
A few hours ahead of the announcement, Sigmar Gabriel, Germany's federal minister for the economy, said on stage during the annual meeting of the World Economic Forum in Switzerland that Germany had already undertaken structural reforms while France had simply increased its debts.
"Every nation has to have the courage to (undertake) such reforms and to speak clearly about them without making people afraid, " he said.
Speaking at the same event in Davos — about the future of Europe — Finnish Prime Minister Alexander Stubb said that whatever the ECB decided to do on QE his country would accept with a smile.