FRANKFURT: The European Central Bank is launching a one-trillion-euro-plus money printing programme to bolster the flagging euro zone economy.
Here is how it will work:
In March, the ECB and national central banks of euro zone member states will start buying 60 billion euros of chiefly government debt each month. That figure includes rebundled private debt, asset-backed securities and covered bonds, typically worth about 10 billion euros, on top of the roughly 50 billion euros in state bonds.
The plan is to buy until September 2016 or until there has been a "sustained" improvement in consumer price inflation, which recently turned negative. The programme could end earlier if successful, or be extended if its impact is small.
12 percent of the buying will be in the secure debt of European institutions - the European Investment Bank as well as bodies set up to help troubled countries in the euro crisis, the European Stability Mechanism and the European Financial Stability Facility.
A further 8 percent of the overall purchases will be government bonds bought directly by the ECB.
Any risk here will be shared across the entire euro zone.
The remainder - 80 percent of the government bonds - will be the responsibility of national central banks. They bear the risk.
Bonds with a credit rating of BBB-, one notch above junk, qualify. Below that, a country must be in an aid programme.
A maximum of 33 percent of the bonds issued by a country may be bought. This means that Greece would not qualify for now because the ECB and other euro zone central banks already own more than this amount.
Only 25 percent of any individual debt issue in circulation can be bought.
Central banks that buy are on an equal footing with other bondholders in the event of default. Bonds with a maturity of between 2 and 30 years are in play.
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