ECB's loans offer clues in QE guessing game

The guessing game over the timing of euro zone money printing will intensify as the European Central Bank unveils a closely watched gauge of policy in the coming week, the highlight of a calendar dominated by Europe's malaise.

On the other side of the Atlantic, investors will continue placing their bets on a different but equally crucial event: when the U.S. Federal Reserve might raise interest rates.

U.S. data and several Fed central bankers will give a sense of the speed of the recovery and when a rate rise might be merited, while oil prices and Chinese data will provide plenty more for markets to digest.

"The key story is going to be in the euro zone," said James Knightley, ING's senior economist, referring to the results of the ECB's targeted long-term refinancing operations (TLTROs) on Thursday.

The cheap loans for banks are one of the ECB's main ways to flush money into the stagnating euro zone economy. "If the take-up is poor, that could increase market talk that the ECB is going to step in and use other tools," Knightley said.

That means a sovereign bond-buying program like those used in the United States, Britain and Japan, but which Germany fears would encourage reckless state borrowing and fuel inflation.

Such a program may come early next year. "The take-up of TLTROs could swing the ECB's Governing Council between January and March, depending on how the number looks," said Citigroup economist Guillaume Menuet.

The first TLTRO was taken up only to the tune of 83 billion euros. Hopes are higher for this time but forecasts hover around the 150 billion euro mark, leaving the ECB short of the 400 billion euros it was prepared to offer banks in total.

On Monday in Brussels, ECB President Mario Draghi will tell euro zone finance ministers no amount of stimulus can replace reforms to tax, labor and pension systems to bring down near-record unemployment.

New forecasts by the ECB predict the euro zone, which generates a fifth of global output, will grow just 1 percent in 2015 rather than the 1.6 percent predicted three months ago.

German October industrial production data and French business sentiment for November, due on Monday, are likely to show the weakness of the rebound as the bloc struggles to overcome its debt and banking crises.

Falling oil prices will also have an impact on the ECB's thinking as it deals with very low inflation. Brent crude slipped 57 cents to settle at $69.07 a barrel on Friday, averaging below $70 in the week for the first time since 2010.

Euro zone finance ministers will also try to decide on how to best help Greece in the coming weeks since a new credit line for Athens will not by ready by an original Dec. 8 deadline.