In principle, quantitative easing is simple - print money, buy bonds. The idea is to pump money into the economy, encourage more lending and stimulate growth. Such bond-buying programs by the US Federal Reserve and the Bank of England were largely considered successful.

But the euro zone is not a country. It is a currency union with 19 members, each with its own government bonds and its own politics. That makes quantitative easing in the euro zone much more complicated. Here is a guide to QE, euro style.

Q. What is the point of quantitative easing?

A. The European economy is in a rut. Unemployment is high. Growth is weak. And inflation is dangerously low.

The low inflation trap is especially pernicious, prompting consumers to delay purchases and companies to put off investment. If it worsens, Europe could face the widespread decline in prices known as deflation, which hurts companies' profits and leads them to lay off workers.

Once deflation grips an economy, it is very difficult to escape. Japan has been trying to break the cycle for two decades.

In such an environment, central banks usually resort to cutting interest rates. But the European Central Bank has already lowered its benchmark rate to 0.05 per cent, effectively zero. It has even imposed a negative interest rate on bank deposits held at the central bank.

The ECB has also been lending more money to commercial banks at rock bottom rates. But demand from banks has been tepid.

So quantitative easing is the next logical step - and perhaps the central bank's only option.

Q. How would the quantitative easing plan work?

A. The bank would create new euros and use the money to buy assets on the market, largely government debt. The increased demand from the central bank should raise bond prices and push down yields.

If the tactic works, it will ripple through financial markets, pulling down the interest rates on other types of debt, like business loans. The increased borrowing that results will stimulate demand and help drive inflation.

Q. What kinds of assets will the central bank buy, and how much?

A. The central bank has indicated that it wants to increase its balance sheet, the crucial measure of how much stimulus it is providing to the economy, by €1 trillion ($1.43 trillion). It is currently at €2 trillion.

Analysts have been saying that a government bond buying program of less than €750 billion will fail to impress markets. The bank, though, may avoid giving a precise long-term target and simply announce monthly purchase goals of €50 billion or so, similar to the strategy used by the Fed.

As for the types of bonds, the central bank has already begun buying private sector assets, such as bundles of real estate loans. It could also buy corporate bonds. But the supply of private sector assets is limited, leaving government bonds as the largest target.

The trickiest part will be figuring out how much of each country's bonds to buy. The euro zone does not have a single, pan-European government bond similar to Treasuries, the main vehicle for quantitative easing in the US. The most likely solution is that the European bank will buy bonds in proportion to each country's share of central bank capital, which is calculated according to population and gross domestic product.

But other formulas are possible. For example, it could buy euro zone bonds in relation to the outstanding debt of each country - a method that would favor the most indebted countries like Italy and Greece. The central bank may also look for a way to avoid buying Greek bonds, because of uncertainty whether a new government in the country will honor all the its obligations.

Q.What are the risks for Europe?

A. The biggest risk may be political.

Government bond purchases prompt fear and loathing in some northern countries, notably Germany. People worry that they could wind up stuck with the bill if a country defaults. Quantitative easing could alienate a significant number of Germans and reduce support for the euro zone coalition, which has already suffered because of the region's poor performance during the last five years.

There has been speculation that the European Central Bank may try to address German concerns by delegating bond purchases to the national central banks, which in theory would absorb any losses. But the speculation highlights another risk - that the ECB will make too many compromises and dilute the impact of quantitative easing. Critics say delegating to the national central banks would undermine the idea of a single currency with a strong central bank. Others say it might be necessary to mute criticism from Germany.

Q. Will quantitative easing work in Europe?

A. The most important effect of quantitative easing might be psychological. By demonstrating that it is serious about stoking inflation, the ECB could prevent people from entering a mind-set where they think prices are falling and slow their purchases as a result. This is why Mario Draghi, the central bank president, and other top central bankers talk a lot about "inflation expectations."

Another benefit, from a euro zone perspective, would be a weaker currency. The euro has already fallen substantially because of expectations that quantitative easing is imminent. A weaker euro helps exporters by making European products like BMW cars or French cheeses less expensive for consumers in the United States and other foreign markets.

But the jury is still out on the impact on borrowing.

European companies usually get credit from banks. By contrast, businesses in the United States typically raise money by selling corporate bonds.

So quantitative easing may not be as effective in Europe. It is unclear whether pushing down interest rates on government bonds through quantitative easing will translate into lower borrowing costs for companies in countries like Italy or Spain, where the shortage of credit is most acute.

There is also considerable skepticism whether quantitative easing will do any good at all, especially since the central bank has waited so long.

The Nobel laureate Joseph Stiglitz called quantitative easing "a last resort that isn't likely to work." Monetary policy can drive up asset prices and create a bubble, Mr. Stiglitz said in an interview, "but consumption isn't going to go up. Investment's not going to go up."

Q. Will it affect other countries?

A. There will be collateral damage - and it is already happening.

The euro has weakened sharply in recent months, and that trend is likely to continue with quantitative easing. That downward pressure prompted the Swiss National Bank last week to abandon its effort to cap the value of its currency against the euro. Switzerland decided it was just too costly and risky.

The move shocked the markets, sending the value of the Swiss franc soaring. The price has remained high, placing a huge burden on Swiss exporters and the tourism industry. Foreign currency brokers were also hurt; several went out of business.

While other side effects may be equally unpredictable, policy makers and analysts have generally welcomed the central bank's action. A healthy European economy, they say, is good for the rest of the world.

NYT