ECB plans QE according to paid in capital: Source

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The European Central Bank (ECB) could be ready to announce a quantitative easing (QE) program based on the contributions made from national central banks, a source close to the central bank has told CNBC.

The source said that the central bank is planning to design a sovereign debt purchase program based on the paid-in capital contributions made by euro zone central banks.

Every national central bank pays a certain amount of capital into the ECB. For example Germany pays in 17.9 percent of the total contributions, while France contributes 14.2 percent. Cyrpus, meanwhile, pays the least with 0.15 percent of the total.

The level of this paid-in capital contribution would determine how much of that country's sovereign debt the central bank would purchase, according to the source. However, the ECB's plans for extraordinary measures have yet to be finalized.

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The comments were made ahead of the ECB's next meeting on January 22, at which it is widely expected that it could announce a full-blown quantitative easing program in order to stimulate growth and demand in the deflation-hit euro zone.

ECB spokesman Michael Steen declined to comment.

On Friday, sources told Reuters that the bank was considering a hybrid approach to government bond purchases which would combine the ECB buying debt with risk sharing across the euro zone and separate purchases by national central banks.

The latter element of such a design would hope to ease German concerns over the central bank taking on the debt of struggling nations such as Greece.

Elsewhere on Friday, a source at the ECB told CNBC that the central bank had discussed a 500-billion-euro ($593 billion) quantitative easing program, although experts disagree over whether that amount is enough the help the euro zone.

Goldman Sachs' chief economist, Jan Hatzius, told CNBC that while 500 billion euros was not an insignificant amount, the ECB could have acted earlier.

"500 billion isn't a small program if you compare it to some of the programs that the U.S. Federal Reserve has done. QE2 (the Fed's second round of monetary easing in late 2010) was $600 billion. It's not a small program," he told CNBC Monday on the sidelines of Goldman Sachs' Global Strategy Conference.

"That said, we do need a large effort by the ECB. They have been behind, they should have moved in the direction of much more aggressive monetary easing a lot earlier. They are playing catch-up so in that context more would better."

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