Legal challenge shows rocky path to ECB money-printing

A landmark legal opinion this week will remind the European Central Bank of the limits it faces as it advances towards money printing, while a tumbling oil price saps inflation in debt-strained Europe.

With expectations high that the ECB is on the verge of buying government bonds with new money to shore up the economy, an influential adviser to Europe's top court will give his view on Jan. 14 about an earlier unused bond-buying scheme. It is the latest chapter in a long-running and increasingly bitter dispute about quantitative easing (QE) between the ECB and Germany, the largest member of the 19-country bloc, that is likely to limit the size or scope of such a program.

As the debate continues, the euro zone economy is all but grinding to a halt. Germany is expected to announce modest growth on Jan. 15 for last year.

In the United States, fresh data on rising employment as well as retail sales is set to show just how much its recovery has overtaken Europe.

"The global economy is at a precarious point," said Jacob Kirkegaard of Washington think tank, the Peterson Institute. "The falling oil price is a huge shot in the arm. Nonetheless, it is clear that the ECB will have to do something. There is no growth and the debt burden is too high. The world will be flying on one engine, the U.S., for quite some time."

Oil's second-biggest collapse on record has taken the price of a barrel of benchmark Brent crude to around $50 from $115 in the middle of last year. That is a mixed blessing for the stuttering global economy. While it is good news for a slowing China and should put more money in the pocket of motorists around the world, cheap oil has put price inflation into reverse in the euro zone, increasing the burden on countries with heavy debts. It has also compounded an economic and currency crisis in neighboring Russia, one of the world's biggest oil exporters. Russia is already locked in conflict with neighboring Ukraine. Ratings agency Standard & Poor's has said it will conclude a review of Russia's credit status by mid January. Any downgrade would badge Russian bonds as "junk" for the first time in more than a decade.