The ECB is expected to hold rates at a record low of 1.0 percent at its first Governing Council meeting since a reshuffle of top posts last week saw Belgian Peter Praet succeed arch-hawk Juergen Stark in the role of setting the bank's policy template.

The meeting takes place against a backdrop of growing tension over Greek bailout talks, a slide in the euro, and nervousness in the financial sector, with banks depositing funds at the ECB in record amounts rather than lend to each other.

Banks are awash with cash after taking an unprecedented 489 billion euros in the ECB's first 3-year funding offer last month - one of two such operations it announced at its December policy meeting, when it also cut rates for the second month running.

ECB President Mario Draghi, who put his mark on the bank after just two months at the helm by handing Praet the powerful economics job previously held by a German, will urge governments to do more to fight the crisis now the ECB has acted.

"We think the ECB will for now wait and see how the measures it has implemented are working," said Goldman Sachs economist Dirk Schumacher, adding that he expected "more pressure from the ECB on governments to do their part ... in the run-up to the EU summit in Brussels on January 30."

The German and French leaders met on Monday to discuss how to boost growth in euro zone states struggling to tackle the debt crisis and rising unemployment - a topic that will be taken up at the summit in three weeks' time.

The ECB policymakers must assess the risk of recession in the 17-country euro zone, as well as the risks to the financial system from the debt crisis, which is a brake on global growth.

International Monetary Fund Managing Director Christine Lagarde was reported on Monday as saying Europe as a whole may avoid a recession this year and that there are reasons to be more upbeat about prospects for the region.

The ECB must also guard against deflation.

Annual inflation in the euro zone eased to 2.8 percent in December and the ECB expects it to fall further during the course of this year, possibly below its target of just under 2 percent. That could allow the central bank to cut rates again.

"We see a certain probability of them cutting rates in one of the next three meetings - but for the next three meetings in total we wouldn't put the probability at more than 40 percent," said Christian Schulz, economist at Berenberg bank.

"They are back to the post-Lehman trough in interest rates," added Schulz, a former ECB economist.

"The real economy situation is not worse than post-Lehman and the ECB has made clear that the interest rate is very much geared towards the real economy and the non-standard measures are geared towards the financial crisis."

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

ECB in graphics: http://link.reuters.com/kah88r

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

QE DEBATE

The ECB has used its non-standard measures - bond purchases and liquidity operations - to help to fight the debt crisis and the provision of 3-year funds to banks has been seen in some quarters as a form of "quantitative easing" via the back door.

French President Nicolas Sarkozy said last month the funds provision meant governments in countries like Italy and Spain could look to their countries' banks to buy their bonds.

However, the record deposits at the ECB indicate this is not happening on a significant scale, even if ECB policymaker Christian Noyer has said European sovereign debt sales have been going better since the ECB started extending the long loans.

"I don't think (Draghi) will tell banks what to do with the money," said Schulz. "We think there may be a small help to governments ... but larger banks will continue to deleverage and stay away from government assets as far as they can."

Lorenzo Bini Smaghi, a former Executive Board member who left the bank at the end of the year together with Stark, opened the door to a possible ECB policy shift by saying last month the bank should launch a U.S.-style asset purchase program if economic conditions required it.

If employed, such a policy could mark a venture into the realm of quantitative easing - essentially printing money to buy assets like bonds - a path pursued by the U.S. Federal Reserve and the Bank of England but one the ECB has fiercely resisted.

The ECB offsets its existing purchases of government bonds by attracting an equal amount of deposits from banks to make sure there is no increase in the money supply, which it is concerned could be inflationary.

The bank has resisted political pressure to embark on quantitative easing or to ramp up its bond buys, and new board member Joerg Asmussen reiterated this stance last week by saying the purchases were "limited in timeframe and volume."

Draghi, who appears to be less of a micro-manager than his predecessor Jean-Claude Trichet, could nonetheless face questions about whether Bini Smaghi's comments signal a debate about quantitative easing at the ECB.

With Asmussen, Benoit Coeure will attend his first ECB monetary policy meeting, and analysts are looking for signals on whether, and if so how, the bank's policy has shifted after the change of guard.

Another issue for the post-meeting news conference will be a call from ECB policymaker Athanasios Orphanides last week for euro zone leaders to abandon plans to make private sector investors help reduce Greece's debts.

Orphanides' push has shown no sign of gaining any traction in Europe's capitals.

(Additional reporting by Eva Kuehnen)

By Paul Carrel