The European Central Bank is in a policy no man's land, bombarded by news of a stagnating euro zone economy but hesitant to move forward with new stimulus until measures it loaded in June have ignited.After the ECB cut interest rates in June and promised banks cheap long-term loans starting in September, about all that is left is printing money to buy bonds - so-called quantitative easing (QE).
But there are tricky practical and political barriers in the ECB's way: it is boxed in by its own plans, and still faces strong opposition from economic power Germany to any such monetary leniency.
Already deployed by other major central banks, QE could be used to pump money into the euro zone economy with a view to stimulating growth and staving off deflation, which has already gripped some countries in the bloc's south.
At just 0.4 percent, euro zone inflation is in what the ECB considers a "danger zone". Economic growth, meanwhile, ground to a halt in the second quarter even before the bloc has started to feel the impact of sanctions on and by Russia over Ukraine.
Yet the ECB may be in a wait-and-see mode for some time, waiting until the measures it announced in June kick in. The first tranche of long-term loans it is offering banks to stimulate lending, called TLTROs, is not available until Sept. 18, with a second shot in December.
On the plus side, while the economy had no growth in the second quarter, euro zone banks in the same period did ease lending terms for firms for the first time since the start of the financial crisis.
And as well as TLTROs, the ECB is also intensifying preparations to buy asset-backed securities (ABS), which are created by banks pooling loans into an interest-bearing bond that is sold to raise funds.
The ABS market has not recovered following the global financial crisis, but the ECB hopes that by supporting this segment it can get credit to the smaller firms that make up the backbone of the euro zone economy.
Any ABS plan is likely to be small, but the ECB expects take-up of 450-850 billion euros ($601 billion-$1.13 trillion) for the TLTROs, potentially more than the total annual GDP of the Netherlands.
However, despite the queued-up stimulus, improving credit conditions and the prospect of a more robust banking sector thanks to upcoming health checks, France and governments further south want the ECB to do more to buoy their economies, which they have been unable - or unwilling - to shape up.