(Bloomberg Opinion) -- The European Central Bank should count itself lucky. In the last few weeks, most of the spotlight on central banks -- and the controversy -- has fallen on the Federal Reserve. The ECB has essentially flown below the markets’ radar, even though Europe is facing a much tougher economic outlook. But the meeting this week of the ECB’s Governing Council will reignite interest in the bank’s intensifying policy challenges as it also faces an upcoming leadership change.

Having had to respond to acute sovereign-debt pressures in some member countries (including Greece, Italy, Portugal and Spain), the ECB embarked a lot later than the Fed on normalizing monetary policy. It took advantage of a pickup in regional growth at the end of 2016 and the beginning of 2017 by tapering its large-scale purchases of securities, a process known as quantitative easing, over the course of the year. It terminated the program at the end of December, and reiterated its expectation that it would raise interest rates in the summer of 2019. The ECB did so despite the uncertainties associated with the trifecta of a messy Brexit, unsettled political circumstances in several member countries and bouts of market concerns centered on Italy’s more contentious relations with the European Commission on budget policy.

But an orderly gradual exit from prolonged reliance on unconventional interest-rate and balance-sheet measures, which seemed both feasible and desirable, has proven less obvious with the more recent change in the economic environment, including uncertainties in China, an important trading partner. Europe is now dealing with a slowdown in growth momentum that, if it isn't countered by pro-growth policies at both the national and regional level, could halve the region’s expansion rate to around 1 percent in 2019. This would increase the risk of some countries falling into recession and a return of financial instability.

As I detailed here, the European economy resembles a once impressive team that is now hindered by challenged teamwork and less confident performances by its five biggest players that historically have driven the majority of the good results (France, Germany, Italy, Spain and the U.K.). An additional risk is that weakness can become self-feeding. No wonder ECB President Mario Draghi recently warned that the region’s slowdown was likely to be less temporary and less reversible than the central bank had initially anticipated.

This less favorable growth environment significantly complicates the policy outlook for the ECB. On the one hand, leaving its policy guidance unchanged risks unsettling markets, which would raise borrowing costs and increase the headwinds to growth. On the other hand, with policy rates already negative in nominal terms, and with a return to quantitative easing likely to face political opposition, the central bank has little ammunition to counter the slowdown.

The most likely outcome from the Jan. 24 meeting is that the ECB will seek to regain greater policy optionality but refrain from any new and major policy announcements. Based on a downgrade to its growth outlook, it will make the earlier interest-rate guidance more conditional; and it will leave open the possibility of a new quantitative-easing program should economic conditions deteriorate further.

A few weeks ago, such an outcome risked being viewed as proof the ECB was falling short of adequately recognizing the realities on the ground, thereby fueling unsettling market volatility. That would have exposed the central bank to political criticism that it has an insufficient “feel” for the situation at hand. But thanks to the recent more reassuring signals that investors received from a change in narrative by the Fed, market anxiety has abated quite a bit. This gives the ECB a bit of a breather, though it’s unlikely to be a long one.

In a more constructive political environment, this pause would be used by governments to progress on well-identified pro-growth policies at both the country and regional levels. But this would require a major shift away from the political uncertainties and polarization that have paralyzed much of the economic policy making in the region.

A more likely outcome is that the ECB will find itself in a more intense policy spotlight. And the scrutiny might not be comforting, not only because of the bank's limited policy flexibility, but also because Draghi’s non-renewable term ends in October with no easy or obvious handoff available as yet.

The ECB in recent weeks has successfully sidestepped both the political pressure and the blame game the Fed has endured. But the European bank is not immune from the more general malaise that now threatens the central banking community as a whole, as the most systemically important of these institutions have gone from being effective suppressors of volatility to inadvertent contributors to it and largely for reasons they do not control.

To contact the author of this story: Mohamed A. El-Erian at melerian@bloomberg.net

To contact the editor responsible for this story: Max Berley at mberley@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. His books include “The Only Game in Town” and “When Markets Collide.”

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