THE European Central Bank (ECB) is considering a hybrid approach to government bond purchases that would combine the ECB buying debt with risk sharing across the eurozone and, in a nod to German qualms, separate purchases by national central banks.

    Sources familiar with the discussions said such an option for bond-buying, also known as quantitative easing (QE), is among the tools the ECB is preparing ahead of its Jan. 22 policy meeting should it decide to act to address falling consumer prices and a growing risk of deflation in the eurozone.

    Several QE plans are under discussion and nothing has been decided so far.

    The debate reflects the ECB’s efforts to build a robust program that meets German concerns about how much risk it would take on, yet also pleases investors anticipating an unlimited money-printing pledge.

    Markets and many economists believe anything short of an unlimited money-printing will fail to revive a moribund eurozone economy and undermine the unity of the currency area.

    But Paul de Grauwe, an economist with the London School of Economics, warned that any move to leave the responsibility and risk of bond-buying with national central banks posed a grave threat to the eurozone.

    “This would be a kind of step towards the disintegration of the eurozone,” he said.

    The ECB Governing Council discussed the current situation at a dinner Wednesday night as it gathered for a regular non-policy meeting. One central bank source said there was “clearly more of a consensus than before” that QE might be necessary.

    “On the rest, there are still pretty much divergent views on the whole range of issues — volume, open-ended or closed, risk sharing or not, whether there are contingencies and which ones. It’s still very open,” the source said.

    A volume of 500 billion euros (US$650 billion) was suggested by ECB experts in a presentation, another source added.

    A third central bank source said one of the options that was discussed was one where the ECB would buy a certain share of the total program and in case of default the risk would be shared among national central banks depending on their capital share.(SD-Agencies)