While Mario Draghi has argued for years that Europe is not turning Japanese, in terms of a deflationary spiral, the performance of European government bonds would suggest that the battle is being lost against deflation. It is a near certainty that the ECB will introduce a programme of quantitative easing on Thursday that involves the purchase of government bonds of member states. However, less certain is the mechanics of the programme and whether it will have the desired effect of stimulating a recovery in the real economy, particularly given Europe’s bank-based financial system (the US has a market-based financial system). On the currency front it looks like the Euro is on the ropes and Draghi now has the opportunity to land a decisive punch that could send the Euro even lower, by announcing a larger and more aggressive programme of bond buying than expected. However, with expectations running high there is plenty of room for disappointment.