IN the summer of 2012, with the euro in crisis and the European experiment of unified government seemingly on the brink, the head of the European Central Bank made a now-famous vow.
"The ECB will do whatever it takes to preserve the euro," Mario Draghi said. "And believe me, it will be enough."
On Thursday, global markets will be watching to see whether Draghi will back that promise with a mountain of cash.
The ECB, the equivalent of the U.S. Federal Reserve, controls monetary policy for the 19-member Eurozone economy. The bank is widely expected to embark on a U.S.-style plan of monetary stimulus designed to prevent the continent from sliding into recession or, worse, deflation.
The ECB's Governing Council is expected to take the unusual and risky step of printing money to buy bonds on a massive scale, including the sovereign debt of struggling nations like Spain, Italy and recession-plagued Greece. The goal is to inject cash into those countries to stimulate the regional economy.
For Americans, implications of decisions by central bankers in Frankfurt, Germany, are modest in the short run but potentially profound.
Although the U.S. economy is shifting into high gear, it remains vulnerable to a downturn in the European Union — the fourth-largest U.S. trading partner. Meanwhile, growth in the rest of the world is faltering, and some analysts warn that the U.S. can't long remain an island of prosperity if a global slowdown takes hold.
"There's the possibility of this deflationary spiral," said Petr Zemcik, director of European economics for Moody's Analytics.
European stock markets have been edging up this week, while the interest rates on debt offered by Germany, Italy, Spain and other European states have been edging down on speculation of a central bank stimulus.
Indeed, analysts expect market turmoil if the ECB fails to act, or even if it offers a program perceived as too small.
"If this didn't happen, I'd be writing my column from underneath my desk," joked Bob Johnson, director of economic analysis for mutual fund research firm Morningstar Inc.
Apart from Europe, China poses another worry after a report this week that its growth slowed to 7.4% last year, the lowest rate in more than a decade. Further, Japan slipped into recession in the third quarter, even as its government applies shock therapy to the long-stalled economy with a combination of deregulation and monetary stimulus.
Japan's long-running economic malaise exemplifies the threat posed by a deflationary trap, analysts warn.
"That kind downward spiral is what's at stake for the euro area," said Antonio Garcia Pascual, chief euro-area economist for Barclays' investment bank.
Europe, which has struggled economically since the 2008 financial crisis, has recently seen another slowdown. Forecasters anticipate just 1.2% growth this year.
Read more: European Central Bank expected to unveil stimulus plan
"The ECB will do whatever it takes to preserve the euro," Mario Draghi said. "And believe me, it will be enough."
On Thursday, global markets will be watching to see whether Draghi will back that promise with a mountain of cash.
The ECB, the equivalent of the U.S. Federal Reserve, controls monetary policy for the 19-member Eurozone economy. The bank is widely expected to embark on a U.S.-style plan of monetary stimulus designed to prevent the continent from sliding into recession or, worse, deflation.
The ECB's Governing Council is expected to take the unusual and risky step of printing money to buy bonds on a massive scale, including the sovereign debt of struggling nations like Spain, Italy and recession-plagued Greece. The goal is to inject cash into those countries to stimulate the regional economy.
For Americans, implications of decisions by central bankers in Frankfurt, Germany, are modest in the short run but potentially profound.
Although the U.S. economy is shifting into high gear, it remains vulnerable to a downturn in the European Union — the fourth-largest U.S. trading partner. Meanwhile, growth in the rest of the world is faltering, and some analysts warn that the U.S. can't long remain an island of prosperity if a global slowdown takes hold.
"There's the possibility of this deflationary spiral," said Petr Zemcik, director of European economics for Moody's Analytics.
European stock markets have been edging up this week, while the interest rates on debt offered by Germany, Italy, Spain and other European states have been edging down on speculation of a central bank stimulus.
Indeed, analysts expect market turmoil if the ECB fails to act, or even if it offers a program perceived as too small.
"If this didn't happen, I'd be writing my column from underneath my desk," joked Bob Johnson, director of economic analysis for mutual fund research firm Morningstar Inc.
Apart from Europe, China poses another worry after a report this week that its growth slowed to 7.4% last year, the lowest rate in more than a decade. Further, Japan slipped into recession in the third quarter, even as its government applies shock therapy to the long-stalled economy with a combination of deregulation and monetary stimulus.
Japan's long-running economic malaise exemplifies the threat posed by a deflationary trap, analysts warn.
"That kind downward spiral is what's at stake for the euro area," said Antonio Garcia Pascual, chief euro-area economist for Barclays' investment bank.
Europe, which has struggled economically since the 2008 financial crisis, has recently seen another slowdown. Forecasters anticipate just 1.2% growth this year.
Read more: European Central Bank expected to unveil stimulus plan