European Central Bank announces massive stimulus program

The European Central Bank announced today a huge bond-buying program in an attempt to resuscitate thestruggling eurozone economy.

ECB president Mario Draghi said the plan is to purchase60 billion euros ($85 billion Cdn) of sovereign bonds a month beginning in March and continuing throughSeptember 2016. That would put the total stimulus package for the eurozone economy-- including existing schemes -- at just over one trillion euros ($1.5trillion Cdn).

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"Under this expandedprogram,the combined monthly purchases of public and private-sector securities will amount to 60 billion euros,"Draghisaid at a news conference.

"They are intended to be carried out until end [of]September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation."

TheECBhopes the manoeuvre will boost borrowing, avert a deflationary spiraland keep a recession at bay inthe 19 countries that use the euro.

The decision to buy government bonds with new money a policy that is often referred to as quantitative easing, or QE -- comes despite concerns, especially in Germany, that weaker statesin the eurozonemight use the cheap moneyto ease back on their own economic reforms,thereby threatening the EU's stronger economies.

Doubts about the effectiveness of any bond-buying initiative are goingbeyond Germany.

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

The value of the euro fell immediately after the ECB's announcement in anticipation that the new money it will create will drive down the currency's value.

Earlier Thursday, the ECBkept its main refinancing rate unchanged at a rock-bottom 0.05 per cent.

The ECB is struggling to deal with a eurozone economy that is so weak that consumer inflation turned negative last month -- down 0.2 per cent. Like the Bank of Canada, the ECBhas an inflation target of two per cent.

Policymakers in the eurozone are worried about the possibility of deflation, which tends to devastate consumer spending as people hold off buying in anticipation of cheaper prices down the road.