An earlier bond-buying programme announced by the European Central Bank won a crucial legal backing from the top EU court on Wednesday, giving boost to speculation that the central bank may opt for full blown quantitative easing as early as this month, which could include government debt purchases, as it battles the threat of deflation in the euro area.

In his opinion note, Advocate General Pedro Cruz Villalon of the EU Court of Justice said, " The OMT programme..falls within the monetary policy for which the Treaty makes the ECB responsible and does not constitute an economic policy measure, provided that, throughout the whole period of implementation of any OMT programme, the ECB refrains from any direct involvement in the financial assistance programmes to which the OMT programme is linked."

"The stated objectives of the OMT programme may in principle be accepted as legitimate," he said.

The OMT programme was announced by the ECB on September 6, 2012, amid the peak of the sovereign debt crisis in Europe, when even the survival of the euro as a single currency was threatened as the speculation of a break-up of Eurozone gained strength. Under the scheme, the central bank planned to buy government bonds subject to certain conditions. However, the plan was never put into practice.

The ECB bond-buying scheme was challenged in the German Federal Constitutional Court by some including politicians and academics, who alleged that the central bank was acting beyond its mandate in its move to buy state debt. Subsequently, the German Court referred the case to the ECJ, questioning the legality of the OMT programme.

Cruz Villalon said the OMT was "an unconventional monetary policy measure". He also stressed that the central bank must be afforded "a broad discretion for the purpose of framing and implementing" the EU's monetary policy.

"The Courts, when reviewing the ECB's activity, must therefore avoid the risk of supplanting the Bank, by venturing into a highly technical terrain in which it is necessary to have an expertise and experience which, according to the Treaties, devolves solely upon the ECB. Therefore, the intensity of judicial review of the ECB's activity, its mandatory nature aside, must be characterized by a considerable degree of caution," he said.

Advisers' opinions are non-binding on the Court, but the judges usually follow the same while issuing the final ruling after few months. The view was welcomed by markets as it boosted hopes that the bank will be more confident of a full scale quantitative easing. The next ECB policy review is due on January 22.

After December's meeting, ECB President Mario Draghi sent a strong signal that the bank was readying more measures in the backdrop of the worrying economic situation that has been further marred by the falling oil prices.

With Eurozone inflation turning negative for the first time in more than five years in December, driven by a steep fall in energy prices, the bank has come under more pressure to do more. And recent rhetoric from ECB policymakers also hinted that the bank was gearing up to unveil more measures.

Wednesday's court backing is a welcome relief for the ECB as Germany has been voicing strong opposition to measures such as buying state debt.

"This is an important milestone in request for preliminary ruling. OMT is ready and available," the ECB said on its Twitter feed after the news came.

"We have always been convinced that OMTs are legally sound and in line with our mandate," ECB Executive Board member Yves Mersch said.

"Any decision the Governing Council takes will be motivated by and restricted by its mandate to ensure price stability."

Elsewhere today, Draghi said in an interview published in the German daily Die Zeit that the risk of deflation was greater than what it was a year ago. He also said that while the Governing Council remained unanimous in its aim to achieve price stability, there are differences as to what measures to take. He added that the central bank was not left with many options.

Cruz Villalon also pointed out that "setting an ex ante quantitative limit on purchases of government bonds would seriously undermine the effects which the intervention on the secondary market seeks to achieve, with the risk of triggering speculation."

Further he said, if ECB does not have preferential creditor status, it will ensure a more effective normalization of market prices for government bonds as it boosts investor confidence.