By Tom Fairless 

FRANKFURT -- European Central Bank President Mario Draghi hopes to end his eight-year term with a bang. Some fear it could conclude with a fizzle.

In the run-up to his departure on Oct. 31, the central banker has signaled plans for a large, final burst of monetary stimulus to prop up a eurozone economy that is tottering under the pressure of trade tensions.

But critical voices are multiplying, including a growing number from the ECB's own 25-member rate-setting committee.

Mr. Draghi's critics say the eurozone economy isn't weak enough to warrant aggressive new measures just a year after the ECB began phasing out its EUR2.6-trillion ($2.686 trillion) bond-buying program. Borrowing costs for households, businesses and governments are so low, they argue, that easier money will have little effect. The bank's key interest rate is already minus 0.4%.

They also say the measures Mr. Draghi has flagged -- further interest-rates cuts and a new bond-buying program, known as quantitative easing, or QE -- risk leaving the bank with virtually no ammunition if the economy sinks further, while also exacerbating the risk of asset bubbles and damage to the region's banks. Several eurozone governments moved in recent months to rein in excess lending, including France.

"The ECB's monetary policy is doing its duty, but it can't do everything, and it certainly can't perform miracles," Bank of France Gov. François Villeroy de Galhau said in a recent interview with Swiss media.

The French banker has joined traditional hawks in Germany and other northern European countries in questioning Mr. Draghi's bold stimulus plans, especially QE.

"With a second asset-purchase program, the ECB will continue disturbing markets, and prices do not reflect the risk anymore," said Jürgen Stark, the ECB's former chief economist. "All this is not thought through, just to be activist and show we are not at the end of our toolbox."

Those objections raise the prospect of a rare defeat at Thursday's ECB meeting for Mr. Draghi, whose bold new policies held together the fractious currency union during the sovereign-debt crisis. Still, the Italian, who has just two policy meetings left, can usually count on support from a majority of dovish council members, and some skeptics don't have a vote at this week's meeting, including Mr. Villeroy de Galhau.

Investors are pricing in a roughly 50% chance of a 0.2 percentage-point rate cut, as well as a program to buy about EUR30 billion to EUR40 billion of sovereign debt a month. As a compromise, Mr. Draghi could restart the bond-buying program, but at a slower pace, leaving its current restrictions in place.

He could also leave the decision to restart bond buying to International Monetary Fund Managing Director Christine Lagarde, who is set to take the ECB presidency on Nov. 1. Ms. Lagarde said last week that she would reassess the costs and benefits of the ECB's controversial policy tools.

Mr. Draghi's defenders say that it is easier to combat a downturn before it has taken root than to reverse it afterward. New factory orders in Germany fell sharply in July, while Italy's economy has flatlined.

"If you don't do anything then you don't have any side effects, but you don't have any impact on the economy, either," Olli Rehn, head of Finland's central bank and a member of the ECB's rate-setting committee, said in a recent interview. He called on the ECB to launch a broad package of stimulus measures, including substantial new bond purchases.

The fresh uncertainty over ECB policy underscores the political and economic challenges facing central bankers in responding to the global slowdown that has followed the China-U.S. trade war.

The Federal Reserve is cutting rates. Unlike the ECB, however, the Fed raised interest rates during the expansion, giving it more ammunition to fight a downturn.

The eurozone is especially reliant on loose monetary policy, as it is highly dependent on trade for growth. Germany accounts for the same share of world exports as the U.S. with just a quarter of the population. The weakening of the euro in response to easy money has given exporters a much-needed boost.

At the same time, eurozone governments have been unwilling or unable to loosen purse strings to stave off a slowdown.

The recovery that Mr. Draghi's bold policies helped engineer is now at risk, with the region's economy growing at an annualized pace of just 0.8% in the second quarter and its manufacturing sector in recession.

However, the services sector, which accounts for two-thirds of eurozone output, is resilient, and unemployment is at an 11-year low.

"I find myself surprisingly skeptical, probably for the first time," Stefan Gerlach, a former deputy governor of Ireland's central bank, said in an interview. "Draghi does not seem to hesitate to bind the hands of his successor. I'm not sure the economy needs it. I'm not sure it achieves much. Some of the arguments the hawks are making sound sensible."

As part of a new bond-buying program, Mr. Draghi has suggested that the ECB could loosen self-imposed rules aimed at ensuring it doesn't dominate debt markets.

That would trigger opposition in Germany. German Finance Minister Olaf Scholz said last month that he would look into outlawing negative interest rates for retail depositors.

The ECB might also introduce measures to protect eurozone banks against even more negative interest rates. Banks bear the brunt of the policies since they need to keep money on deposit with the central bank, in essence paying the ECB to store their money. Meanwhile, banks have been unable to pass those costs fully on to depositors, who often still receive 0% on savings accounts. The ECB might provide banks some relief by exempting some bank deposits with the ECB from negative rates.

"We are at the end of the efficiency of monetary policy," France's finance minister, Bruno Le Maire, said in an interview. "The risks that we are now facing are not related to financial stability [but] how to fuel growth. The response is not only in the hands of the ECB."

With political pressure rising on central bankers around the world, Mr. Draghi may want to leave Ms. Lagarde with room to maneuver.

"The next ECB president will really need to come up with a game plan to deal with the next downturn," said Elga Bartsch, head of macro research at BlackRock. "Just turning around and saying, 'Sorry, we are out of policy options,' is not going to serve the independence of central banks well."

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

September 10, 2019 05:44 ET (09:44 GMT)

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