The European Central Bank launched what City experts called a “shock and awe” plan to pump €1.1tn (£830bn) into the eurozone in a last-ditch attempt to prevent the single currency bloc sliding into an intractable slump.

In the teeth of fierce political resistance from Germany, ECB president Mario Draghi said he would inject €60bn of new money into financial markets every month until at least September 2016.

The Frankfurt-based bank will use electronically created money to buy the bonds of eurozone governments – quantitative easing – to try to boost confidence, push up inflation and drive down the value of the single currency, helping to increase exports and kickstart growth.

Nancy Curtin, chief investment officer of the City firm Close Brothers, said: “The eurozone was in need of shock and awe tactics from the ECB to combat the prospect of a prolonged period of deflation, and Draghi has finally delivered on his promise to do whatever it takes.”

The euro fell to $1.14 against the dollar after the announcement – its lowest level for 11 years, and well below the $1.17 exchange rate at which the single currency was launched. British holidaymakers planning a spring break on the continent also received a fillip, as the euro lost more than 1% of its value against the pound, with a euro now worth just 75p.

The €60bn-a-month price tag for the QE programme, which will start in March, was larger than many in financial markets had expected, and underlined Draghi’s determination to hold the 19-member currency zone together. The banker, nicknamed “Super Mario” by traders, promised QE would continue “until we see a sustained adjustment in the path of inflation”.

The ECB is meant to keep inflation below, but close to, its target level of 2% – but prices have been rising at less than half that pace for the past year, against a background of plunging oil prices and anaemic growth. With average prices in the shops already falling across the single currency area, the ECB hopes to avoid the threat of a deflationary spiral, in which consumers and businesses slash spending while they wait for prices to fall further, dragging the economy into a recession.

Speaking in Frankfurt Draghi said: “The risks surrounding the economic outlook for the euro area remain on the downside, but should have diminished after today’s monetary policy decisions and the continued fall in oil prices over recent weeks.”

The long-awaited launch of QE will infuriate Berlin, which views the policy as akin to a bailout for free-spending governments such as Greece, and fears that it could allow inflation to get out of control. A headline on the website of the newspaper Bild after the announcement read: “ECB takes billions of debt off ailing euro states: What happens to my money now?”

Draghi said the decision of the ECB’s governing council was made with “so large a majority that no vote was necessary”, but that suggested that the Bundesbank president, Jens Weidmann, had stuck by his longstanding opposition to QE.

Angela Merkel, the German chancellor, speaking at the World Economic Forum in Davos, said: “It does not surprise me that there is a contentious debate within the ECB. The world is already well supplied with liquidity. Regardless of what the ECB does, it should not obscure the fact that the real growth impulses must come from conditions set by the politicians.”

Policymakers in the US and the UK have used QE to restore confidence and unblock financial markets since the depths of the credit crisis in 2009, but the ECB had been reluctant to follow suit in the face of German opposition and fears that it could unleash inflation.

A slowdown in the eurozone, Britain’s major export market, is one of the key risks to UK economic recovery.

George Osborne said: “The fact that the ECB had to take this drastic action shows the European economy is much weaker than the UK economy and it’s also a warning to Britain of the risks that lie ahead if we were to abandon our long term economic plan.”

John Cridland, director general of the CBI, welcomed Draghi’s move: “At the moment, flagging eurozone economies are dragging on UK and world growth. Quantitative easing will give the Eurozone recovery a much-needed boost, which should also have a positive economic effect in the UK.”

Christine Lagarde, managing director of the IMF, which cut its growth forecasts for Germany, France and Italy last week, said QE should “help lower borrowing costs across the euro area, raise inflation expectations and reduce the risk of a protracted period of low inflation”.

The €60bn-a-month total for the QE programme includes the purchase of private sector assets that the ECB had already begun, to try to unlock credit markets.

Draghi echoed Merkel’s call for national governments to take their own steps to kickstart growth, stressing that QE alone would not repair the eurozone economy. “What monetary policy can do is to create the basis for growth, but for growth to pick up you need investment, for investment you need confidence, and for confidence you need structural reforms.”

Sony Kapoor, of the thinktank Re-Define, called on eurozone governments to respond by relaxing austerity policies and increasing public spending, to create demand and restore economic growth.

“Today the ECB has finally arrived as a truly ‘European’ Central Bank. It has acted against political opposition to deliver what is by most measures an ambitious programme of quantitative easing,” he said. “The ECB has finally, if belatedly, done its part. Now it’s time for the eurozone to relax the fiscal constraint.

Draghi ridiculed the doomsayers predicting that hyperinflation would eventually result from QE, saying that hawks had repeatedly warned about inflation taking off each time the ECB had cut interest rates – yet inflation remained very low. He said there should be a “statute of limitations” on such warnings.

The ECB had already announced, in a statement earlier on Thursday, that it would leave its main interest rate unchanged at 0.05%.

In a concession to German reservations, Draghi promised that national central banks would bear much of the risk of their governments defaulting, with just 20% of the new bond-purchases subject to “risk-sharing” between member countries. Some analysts fear that could dent the effectiveness of the policy.

In an aside that will be heard loud and clear in Athens, Draghi also warned: “Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme.”

That could allow the ECB to exclude Greek bonds from QE if, for example, the populist Syriza party wins Sunday’s general election and ditches the austerity programme imposed by its creditors.