The European Central Bank is set to unveil a programme of mass bond buying next week to save the eurozone from deflation, but has bowed to German pressure to ensure that its taxpayers are not liable for any losses incurred on other countries' debt.
Policy makers in Frankfurt are expected to take the momentous decision to embark on quantitative easing on Thursday, with the most likely option at this stage for the ECB to force the 19 national central banks that make up the eurozone to stand behind their own sovereign bonds.
The decision will come just two weeks after it emerged that eurozone prices had fallen in the year to December for the first time in five years. Market expectations of eurozone inflation in the longer term are close to record lows.
The move will bring the ECB closer into line with the US Federal Reserve and the Bank of England, which adopted QE after the global financial crisis.
But ECB officials have reluctantly concluded that introducing full-blown QE is impossible in the face of implacable opposition from the German political and economic establishment.
