[LONDON] Commercial banks' lacklustre appetite for its almost free money could leave the European Central Bank struggling to prime the fragile eurozone economy with another trillion euros as planned.
Although the ECB insists it is travelling on a different road to the Federal Reserve, now eyeing rate hikes, its balance sheet has shrunk by roughly a third since 2012 as cash lent to banks at the height of the debt crisis has been returned.
On Friday, ECB chief Mario Draghi threw the door wide open for full-scale government bond buying, saying "excessively low" inflation had to be raised quickly by whatever means necessary.
Mr Draghi has set a target of returning the ECB's balance sheet to its level of March 2012 - around 3 trillion euros (US$3.73 trillion), compared with the current 2 trillion.
But a Reuters poll this week suggested that by the time it has handed out the second round of its new cheap loans, known as TLTROs, in mid-December, the ECB's balance sheet will be 60 billion euros smaller than it is now.
Many strategists say this squeeze, coupled with what are likely to be internal ECB forecasts of weakening growth and inflation, will push the central bank to launch a quantitative easing (QE) programme by its March 5 meeting.
The ECB will announce on Dec 11 how much TLTRO cash has been handed out at the second tender. The Reuters poll predicted take-up of 145 billion euros, bringing the total amount lent under the programme to 227.6 billion euros.
That would be roughly half what the ECB has offered and less than the 287.2 billion euros of outstanding crisis loans (LTROs) that banks must repay by Feb 26.
The ECB has also started buying covered bonds and asset-backed securities in the last few months, but with just 10 billion euros of debt bought so far, many doubt these schemes can push the balance sheet up by a trillion euros. Even an expansion into corporate bond-buying may not help much.
But ECB board member Peter Praet warned this week that the bank should not be underestimated. "The market is saying we are not going to get the volumes," Mr Praet said. "We are confident we are going to get the volumes."