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Why the ECB may not want to join the QE dance

As one major central bank – the U.S. Federal Reserve – closes the quantitative easing door, markets are hoping another – the European Central Bank – will throw it wide open again.

Many economists now expect that ECB President Mario Draghi will usher in a quantitative easing (QE) policy, involving buying up countries' sovereign debt, early in the New Year.

Something definitely needs to be done in the euro zone. Unemployment remains stubbornly high at 11.5 percent and inflation, at 0.4 percent, doesn't look that far away from the deflation danger zone. Two of its biggest economies, France and Italy, are going to need extra wriggle room to meet their budgetary targets – and even Germany, the stalwart of recent years, looks less confident than for some time.

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European Central Bank and Euro Symbol in Frankfurt, Germany.
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European Central Bank and Euro Symbol in Frankfurt, Germany.

Yet is QE that something? The most obvious problem with a bond-buying program, particularly when it involves buying up sovereign debt, is the potential political fallout.

How can you make sure that you're not giving some countries in the single currency bloc an unfair advantage, particularly if they have already been helped out by tens of billions of euros in bailout aid during the financial crisis? No wonder Germany's anti-European Union party, Alternative für Deutschland, is causing Angela Merkel almost as much trouble as the U.K. Independence Party is for David Cameron.

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And can QE really be that effective? In the U.K. and U.S., effectively printing money has helped to reduce credit spreads and, therefore, the cost of borrowing. Yet the euro zone already has low credit spreads and borrowing rates, after a series of actions by the ECB.

The gap between the cost of short and long-term borrowing for Germany, for example, is already much smaller than it was in the U.S. before QE was introduced there. If funding does not seem to be filtering through to the real economy already, how could the ECB ensure that, by pumping more money into the system, it reached the right places?

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Those in favor of adopting QE would argue that, by spreading the risk around in a way which is allowed under the ECB regulations and ensuring the survival of the euro project, the region as a whole is better off, no matter what some Germans may think. And, frankly, there doesn't seem much else left to do to stimulate the region's recovery.

Whether Draghi chooses to nudge the door open for QE this Thursday or not, his task of steering the euro zone through its recovery looks trickier than ever.

Catherine Boyle is a writer and on-air correspondent at CNBC. Twitter: @cboylecnbc