ECB unleashes its most aggressive effort to revive economy

FRANKFURT, Germany (AP) - Europe's ailing economy will get a major dose of stimulus from the European Central Bank - a bond buying program designed to make loans and exports cheaper so companies can hire and expand.

Starting in March, the ECB will buy 60 billion euros' worth of government and corporate bonds each month at least through September 2016. The 1.1 trillion euro program was an emphatic signal of the ECB's willingness to do all it can to rejuvenate the economy shared by the 19-nation euro currency alliance.

ECB President Mario Draghi pledged Thursday to extend the bond buying if needed until the bank saw a significant upturn in the eurozone's excessively low inflation, which threatens to become a downward spiral.

Stocks rallied in Europe and the United States after the ECB's announcement, with the Dow Jones industrial average jumping 259 points, or 1.5 percent. The euro's value, meanwhile, plunged nearly 2 percent against the dollar to its lowest level in 11 years in anticipation that the ECB's bond purchases will drive down the currency. A lower-valued euro would make European exports more affordable overseas.

The ECB's purchases will flood the economy with money that the central bank will create - a power it wields as the euro's legal issuer. Its chief mandate is to maintain price stability. It's fallen well short of its goal of 2 percent annual inflation, considered consistent with a healthy economy. The current rate is minus 0.2 percent.

Fears have spread that the eurozone could face chronic falling prices, or deflation. Though low or falling inflation is often welcomed by shoppers, it reflects sluggish demand and can paralyze an already weak economy - a problem that has long afflicted Japan, the world's third-largest economy.

The eurozone is still working off a crisis over excessive government debt in countries like Greece, Portugal and Ireland. The alliance's economy has lagged even as the United States and Britain have recovered more robustly from the financial crisis and Great Recession. Unemployment is 11.5 percent across the currency union, and 26 percent in Greece. In the United States, by contrast, the unemployment rate is 5.6 percent.

Earlier Thursday, the ECB kept its main interest rate unchanged at a record low 0.05 percent.

There's no guarantee that the ECB's bond buying can succeed without further action by national governments in the currency union. Skeptics have suggested that the bond buying has been robbed of some of its potential effectiveness through delay and that Europe's problems lie beyond the reach of monetary policy.

"We shouldn't get carried away with the scale," said Luke Bartholomew, investment manager at Aberdeen Asset Management. "It may boost inflation expectations at the margin, but will probably only have a small positive effect on Europe's real economy."

"A weaker euro should help exports a little, but it won't suddenly make European economies much more competitive. That urgently requires structural reforms, which European leaders seem unwilling to push through."