"Non-functioning banking systems are the issue, rather than an absence of liquidity. So for ECB action to be truly effective, we think it needs to include direct lending by either the ECB itself or some supra-national agency (e.g. the European Investment Bank), bypassing the dysfunctional banks," said Norman Villamin,Europe chief investment officer at Coutts, in a blog post on Wednesday.
"Put another way, the ECB needs to take the theoretically unlimited commitment of its entire balance sheet, through its Outright Monetary Transactions (OMT) program, a step further by actively participating in credit markets to facilitate their functioning. This is what U.S. policymakers did successfully under their TARP program in 2008-09, and which the UK is attempting with an expansion of its year-old Funding for Lending Scheme," he added.
(Read More: Funding for Lending Scheme Is a 'Pretty Bandaid')
TARP, the U.S. government program launched in 2008, gave the Treasury powers to buy up mortgage backed securities from ailing U.S. banks in an effort to boost liquidity.
(View More: Barofsky:TARP Was a Failure)
Without a similar move from the ECB, depreciating the euro will be the only option left to stimulate growth in dormant euro zone economies said Villamin.
"If European Union policymakers move decisively in the direction of a TARP-like program, this would finally provide the catalyst for attractively valued European equities to rally," he said.
"Until political appetite for such a move becomes more likely, we remain neutral on European equities in general, favoring non-euro zone regions and preferring to hedge euro exposure in non-euro-referenced portfolios," he added.