In June the European Central Bank decided to induce negative interest rates as version I of quantitative easing in Euroland.
By October 2014, the central bank began buying "covered bonds" which are bonds secured by a pool of loans, such as mortgages. November 2014 it started purchasing "asset-backed securities" injecting a total of about 7 billion Euro into the market (ECB Balance Sheet link).
Why not buy government bonds outright to create a full fledged QE? It turns out that the treaties that founded the modern EU prohibit the ECB from financing governments (aka buying their bonds)! Germany’s Bundesbank, which is always paranoid about inflation (given the sore memories of German Hyperinflation a century ago) is outspoken against expanding the supply of money through government bond purchases. The Bundesbank argument is that aside from risking inflation, the moves reduce the incentives for governments to stop overspending and make their economies more competitive. But ECB president Draghi (who is Italian) suggested that the ECB could add as much as 1 trillion euros ($1.3 trillion) to its balance sheet! A great review can be found here.
