ECB set to launch massive bond sale

The European Central Bank is poised to announce a plan on Thursday to buy government bonds, resorting to its last big policy option for breathing life into the flagging eurozone economy.

Market expectations are sky-high for the ECB to unveil large-scale quantitative easing - printing money to buy government bonds - despite opposition from Germany's Bundesbank and concerns in Berlin that this could allow spendthrift countries to slacken economic reforms.

The momentous step - which comes as global economic prospects dim - has already prompted the Swiss central bank to abandon its cap on the franc, while Denmark, whose currency is pegged to the euro, was forced to cut interest rates in anticipation of the flood of money.

Canada and Brazil have cut the cost of borrowing while two British rate setters at the Bank of England have dropped calls for tighter monetary policy.

A eurozone source has said that the ECB's Executive Board has proposed that it buy 50 billion euros ($58 billion) in bonds per month from March.

The broader, 25-member policymaking Governing Council began meeting on Thursday to discuss the proposal. ECB President Mario Draghi was scheduled to hold a news conference.

"I expect they will deliver, and launch a QE program that will be probably larger than 500 billion (euros)," said Sassan Ghahramani, CEO of New York-based SGH Macro Advisors, which advises hedge funds.

There is uncertainty, however, about the length of the program.

While some media predicted that it would run until the end of next year, it could possibly be cut short or extended depending on whether or not it is having an impact on the eurozone economy.

The duration is significant. A program starting in March and running for a year would total about 600 billion euros, based on a purchase rate of 50 billion per month.

If a similar plan ran until the end of 2016, it could surpass 1 trillion euros.

Money market traders polled by Reuters expected a 600-billion-euro bond-buying plan.

Eurozone inflation turned negative last month; consumer prices fell 0.2 percent, far below the ECB's target that they should rise just under 2 percent annually.

But there are doubts, and not only in Germany, over whether printing fresh money will work.

"It is a mistake to suppose that QE is a panacea in Europe or that it will be sufficient," US Treasury Secretary Larry Summers said at the World Economic Forum in Davos on Thursday.