The ECB has provided the markets with a trillion euros in long-term liquidity in the last few months in an effort to try and buy European governments some time. They are understandably quite reluctant to do much more but the pace of economic deterioration is too much to merely overlook.

A cut in the main refinancing rate seems unlikely seeing as it stands at a record low of 1%.

So what are their alternatives?

My guess is that they come up with some targeted liquidity programs along the lines of the alphabet soup (TALF,TSLF, etc…) spit out by the Fed in the wake of the global financial crisis. Maybe yet another program geared toward small banks without marketable collateral.

My guess is that they want to be seen as doing something to help the economy but not so much as to be bailing out the governments… a tough row to hoe…