* ECB sees small boost from trillion euro QE - paper
* ECB’s Constancio says did not discuss QE detail
* No decision on whether to favour government debt
* Euro falls to five-week low versus U.S. dollar (Adds central bank source in paragraph two)
By Francesca Landini and David Milliken
CERNOBBIO, Italy/FRANKFURT April 4 (Reuters) - The European Central Bank has modelled the effects of buying a trillion euros of assets to ward off deflation, a German newspaper reported on Friday, a day after the ECB’s president said radical policy action might be needed.
A central bank source told Reuters that these kinds of studies had been conducted by the ECB to gauge how such money printing would impact inflation in the euro zone.
ECB President Mario Draghi said on Thursday the central bank had achieved unanimity that asset purchases, also known as quantitative easing, might be needed to tackle inflation if it proved persistently low.
On Friday, shortly before the German newspaper report appeared, Draghi’s deputy, Vitor Constancio, said euro zone central bankers had had no discussions of how these asset purchases might be conducted.
However, the report in the Frankfurter Allgemeine Zeitung implied that the purchases would need to be of a massive scale to have much impact on prices in the 18-member currency bloc, sending the euro to a five-week low against the dollar.
The newspaper said one ECB model showed 1 trillion euros ($1.37 trillion) of asset purchases spread over a year would boost inflation by just 0.2 percentage points, while another model pointed to a 0.8 percentage point uplift.
An ECB spokesman declined to comment on the details of the report, which is the first to mention a specific sum being considered by the central bank.
“As the Governing Council said yesterday, it is unanimous in its commitment also to use unconventional instruments. The relevant Committees of the Eurosystem will continue their reflections on the various scenarios that will be made,” he said.
The lack of detail to date about how the ECB might conduct quantitative easing has made several economists wary about the prospects of it being deployed soon, saying the hurdle to buying government debt remained high.
On Friday, some observers questioned whether it would be worth the ECB conducting asset purchases if the effect on inflation was going to be so small.
“It sounds awfully expensive to spend 1 trillion euros to get 0.2 percent inflation, or even 0.8 percent ... and in turn open a can of worms with unintended consequences,” said Axel Merk, a fund manager at California-based Merk Investments.
The newspaper also quoted someone whom it described as a central bank insider as querying whether such purchases could be made of private-sector assets alone.
“The question would be whether the private debt market in Europe is big enough for QE,” he was quoted as saying.
Someone described as a senior central banker was reported as expressing fears that large-scale purchases could distort markets and create a bubble in prices for corporate bonds.
The Bank of England estimates its measures, with 200 billion pounds ($332 billion) of government bond purchases between March 2009 and February 2010, added 0.75-1.5 percentage points to the inflation rate and increased real gross domestic product by 1.5-2.0 percent.
ECB officials have in the past raised doubts about buying government bonds and other state-backed securities - the mainstay of QE in the United States and Britain - due to the varying credit quality of national debt in the 18-member bloc.
But in an interview with broadcaster CNBC on Friday, Constancio said concerns about moral hazard had eased.
“The fundamentals in Europe have improved, including in distressed countries ... so the need for big pressure now is less than it was,” he said.
“If we are talking about generalised asset purchases, it will have to be about asset purchases in all countries,” he added.
Earlier Constancio, who is attending a conference in the Italian lakeside resort of Cernobbio, told reporters the euro zone economy as a whole was likely to have grown for a second consecutive quarter in early 2014.
Constancio said asset purchases were only likely if inflation was persistently below 1 percent, a level described by Draghi as the danger zone.
The ECB prepares fresh staff economic projections in June, which Constancio said would be crucial in assessing whether March’s surprisingly low inflation reading of 0.5 percent had thrown the bank off course from its goal of reaching inflation of just below 2 percent by the end of 2016. (Additional reporting by Eva Taylor; Editing by Janet Lawrence)