The following shows how markets are set up for the meeting, key factors to watch, and possible consequences:
* SIZE
How much new money will the ECB print? Money market traders polled by Reuters expect a 600 billion euro sovereign bond-buying programme. A day before the meeting, media reports said the ECB would buy bonds worth 50 billion euros a month, with one saying purchases would last a year and another from March to the end of 2016. If true, these would suggest total purchases of between 500 billion and just over 1 trillion euros. "500 billion will be "slightly disappointing ... (and) 1 trillion euros will be bullish," Deutsche Bank co-CEO Anshu Jain said on Wednesday. But investors believe 600 billion euros will not be enough to rekindle inflation to the central bank's target of just below 2 percent. Market inflation expectations are at record lows and reflect scepticism QE will work. A surprisingly big or even open-ended programme, such as that announced by the Bank of Japan in October, will give further impetus to buying of peripheral euro zone bonds and cut their yield premiums over German Bunds. For a graphic on central bank balance sheets, click http://link.reuters.com/fus62t
* PRICING
Economists polled by Reuters put the probability an announcement on QE will come this week at a median 70 percent, slightly less than the 90 percent money market traders are pricing in Yields on top-rated euro zone government bonds with maturities up to six years have fallen below zero as investors have snapped up paper in the hope that they will be able to sell it to the central bank for a profit. ECB policymakers have done little to cool expectations and delaying the decision could cause a massive market upheaval, especially as Greece holds a general election on Jan. 25 that has raised fresh concern about its future in the euro zone.
* POSITIONING
Investors have snapped up euro zone government bonds across the credit spectrum, driving yields to record lows and, for most short-dated top-rated paper, further below zero. But the day before the meeting, German 10-year Bund yields, which had fallen steadily throughout 2014, were set for their biggest daily rise since December 2013 in the wake of the reports on the extent of ECB purchases. In currency markets, options traders have hardened their bearish stance on the single currency. One-week risk reversals, which measure demand for options on a currency rising or falling, on Friday showed the biggest short-term bet on the euro weakening since November 2011.
* RISK-SHARING
There is major uncertainty over how the scheme will work, with the main focus on whether individual national central banks will buy their own countries' bonds and bear the brunt of credit risks in a nod to German moral hazard concerns. This could prompt investors to cut exposure to peripheral euro zone bonds and boost demand for top-rated, more liquid assets. Peripheral bond yields are likely to rise from their record lows and widen their premiums to Bunds.
* EXCLUSION
Speculation is high that the ECB may exclude junk-rated Greek bonds from its purchases as the country heads into an election that could put it at odds with its international creditors and spark a fresh crisis. Greece triggered the currency bloc's debt crisis in 2009, which saw the country shut out of bond markets. Any exclusion of its bonds from QE could send its borrowing costs spiralling back up to unsustainably high levels that could trigger another default. Trade in Greek stocks and bonds could be even more volatile in the run-up to Sunday's vote.
(Compiled by Emelia Sithole-Matarise, Graphic by Vincent Flasseur; Editing by Mark Heinrich)
