ECB ready to start bond buying

Mario Draghi said that the ECB was willing to "undertake outright market operations of a size adequate to reach its objective," adding that details of related ECB action would be worked out "in the coming weeks."

Following a closely watched ECB meeting Thursday, Draghi also said that current exorbitantly high borrowing costs for debt-laden countries such as Spain and Italy were a result of fears about the "irreversibility of the euro."

He noted that market jitters were "unacceptable and needed to be addressed" because the single European currency was "irreversible."

The ECB will likely resume a controversial bond purchasing program by intervening in secondary bond markets in an effort to drive down bond yields for Spanish and Italian sovereign debt.

In 2010, the ECB bought some 211.5 billion euros ($260 billion) worth of government debt from Greece, Ireland, Portugal, Italy and Spain.

The ECB mothballed the program late last year in the face of criticism from other eurozone countries, notably Germany, which said the program contravened an ECB ban of direct central bank state financing and would fuel inflation in the eurozone.

However, the need for action to bring down borrowing costs was highlighted again on Thursday when Spanish benchmark 10-year bonds spiked again toward seven percent. Madrid's IBEX 35 share index slid four percent.

We'll cope, say Monti und Rajoy

Visiting Madrid, Italy's Prime Minister Mario Monti and Spanish premier Mariano Rajoy welcomed that ECB statement but insisted that their nations would not be seeking financial bailouts beyond the recent credit line for Spain's banking sector.

Monti said their aim was budgetary consolidation, adding that "we are concious that we are demanding great efforts from our citizens."

Both Italy and Spain have slashed public spending and raised taxes, prompting large street protests.

ECB rate action delayed

Meanwhile, the ECB left its benchmark interest rate unchanged. Describing euro area economic growth as "weak," Draghi said that this would justify holding interests at an historic low of 0.75 percent.

Responding to demands for a banking license for the eurozone rescue fund ESM, the ECB president said that it wasn't "legally possible."

Italy and France recently suggested that the ESM could be granted such a license, enabling it to hand in sovereign debt of crisis-stricken countries with the ECB in exchange of funding.

The two countries had hoped for an "unlimited boost" to the ESM's firepower so it could help solve the eurozone debt crisis.

Financial markets generally were unimpressed by the ECB announcement. The euro, which had rallied to $1.24 earlier in the week, retreated during Draghi's news conference to $1.22. Shares in Frankfurt and Paris were down about 1.5 percent in late-afternoon trading.

uhe, ipj/ng (dpa, Reuters, AFP)