The ECB is considering three main options for QE … here they are

The next Governing Council’s next policy meeting on January 22

The ECB is considering three main options for QE:

1. The most likely course is the ECB buys 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:

2. Option two is that national central banks buy the debt of their own governments, so the risk remains with the country in question

3. The third is the ECB buys only triple-A rated bonds, hoping that investors would turn to the lower-rated debt of weaker euro zone government which, while riskier, offers a better return

Economists believe the second and third options could backfire:

• If the ECB were unwilling to take on the risk of holding Greek, Italian, Spanish or Portuguese debt, private investors might ask themselves why they should do it

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