In case you missed the full announcement, here’s the link: Mr Draghi gets caught in a broken lift, arrives late, and  announces Quantitative Easing for the Eurozone.

Here is the key paragraph:

[The Governing Council of the ECB] decided to launch an expanded asset purchase programme, encompassing the existing purchase programmes for asset-backed securities and covered bonds. Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market. The purchases of securities issued by euro area governments and agencies will be based on the Eurosystem NCBs’ shares in the ECB’s capital key. Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme.

And this is the other key paragraph:

As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources. With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

So let me give you those two paragraphs again, this time with the important parts highlighted in red:

[The Governing Council of the ECB] decided to launch an expanded asset purchase programme, encompassing the existing purchase programmes for asset-backed securities and covered bonds. Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market. The purchases of securities issued by euro area governments and agencies will be based on the Eurosystem NCBs’ shares in the ECB’s capital key. Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme.

As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources. With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

What that means:

1. No, journalists, this QE program is not “bigger than expected”. It’s exactly what was expected. The ECB was already buying up €10 billion worth of asset-backed securities and covered bonds each month. Come March, it will be buying an extra €50 billion per month of investment-grade government bonds (and some debt from euro-area public agencies – whoever they are, because I’m not sure who they are, and google was unhelpful). Which is about what the consensus was expecting.
2. Buying “investment-grade” securities technically means that Greece and Cyprus are locked out of the QE program.
3. But if you read the detail of the technical press release that came out later yesterday (see here), it seems that “investment-grade” securities also includes “non-investment grade” securities (those of Greece and Cyprus), provided that they play by the rules. If not, “during reviews in the context of financial assistance programmes for a euro area Member State, eligibility would be suspended and would resume only in the event of a positive outcome of the review” #sneaky #AlexisTsiprasWatchOut
4. That said, the allocation of the monthly €50 billion between the member states will be based on the proportional shares held by the individual National Central Banks in the European Central Bank. So:

   

   Meaning that Cyprus was never going to feature that strongly, seeing as they hold only 0.15% of the shares.

5. Also, Germany will be getting the largest portion of the stimulus – which is a bit ironic seeing as they’re not really the ones that so desperately need it.
6. “Decentralised implementation” means that the ECB won’t be buying directly – it’ll be making their purchases through the Central Banks of the member states. Many people think that this is a Bad Thing because it shows Eurozone Disunity and Lack of Commitment, but that was really just a question of the risk-sharing (because if the risk was shared equally by everyone, then this would just be a practical way to get the buying done).
7. On the risk-sharing front, 20% of all asset purchases will be equally shared, and the rest will be for the account of the individual National Central Banks. That is: “We’re 20% in this together; and 80% each to his/her own; unless there’s a crisis and you need a bailout because you can’t print money, in which case, we’re all 100% German European.”

In Related News

After the announcement, Denmark had to cut its interest rates for the second time in three days.

According to Bloomberg:

“Denmark sent hedge funds and other speculators a clear message yesterday, daring them to test the full force of its monetary arsenal at their own peril.”

According to the Danish National Bank:

“We have plenty of kroner. We have the necessary tools in terms of interest-rate changes and interventions and we have a sufficient supply of Danish kroner.”

According to me:

“Yes, but you had to cut your interest rates twice in three days. That sends its own clear message. And it sounds a lot like Abba singing S.O.S.”

We shall see. But for my money, the Danish krone will need to free-float. And soon.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.