FILE - In this May 31, 2012 file picture President of the European Central Bank Mario Draghi reports to the Economic Committee, in capacity as the head of the European Systemic Risk Board, at the European Parliament in Brussels. European Central Bank president Mario Draghi has already taken Europe's monetary authority into uncharted territory. Now, with the debt crisis in Europe threatening further disaster, he may have to push it even farther into the unknown to save the euro. The 17 countries that use the euro are struggling as economies across the region face deepening recessions. Spain and Italy, the two chief trouble spots, are threatened with a financial collapse that could tear the 13-year old currency union apart and rock the global economy. (AP Photo/Yves Logghe,File)
FILE - In this May 31, 2012 file picture President of the European Central Bank Mario Draghi reports to the Economic Committee, in capacity as the head of the European Systemic Risk Board, at the European Parliament in Brussels. European Central Bank president Mario Draghi has already taken Europe's monetary authority into uncharted territory. Now, with the debt crisis in Europe threatening further disaster, he may have to push it even farther into the unknown to save the euro. The 17 countries that use the euro are struggling as economies across the region face deepening recessions. Spain and Italy, the two chief trouble spots, are threatened with a financial collapse that could tear the 13-year old currency union apart and rock the global economy. (AP Photo/Yves Logghe,File)
FILE - In this July 5, 2012 file photo President of the European Central Bank Mario Draghi speaks during a news conference in Frankfurt, central Germany. Draghi said in an interview with French daily Le Monde posted on the bank's website Saturday, July 21, 2012, that predictions of a eurozone "explosion" underestimate "the political capital that our leaders have invested in this union, as well as the support of European citizens." (AP Photo/dapd, Mario Vedder, File)
FRANKFURT, Germany (AP) ? European Central Bank head Mario Draghi says the bank is ready to intervene in the bond market to drive down countries' high borrowing rates, and urged European leaders to get their bailout fund ready to intervene as well.
Draghi said Thursday the bank could buy bonds if the borrowing rates stop the ECB in its efforts to spread its low interest rates throughout the 17 countries that use the currency.
Such a move could, crucially, lower the borrowing rates that are threatening to push Spain and Italy into financial disaster.
The ECB "may undertake outright open market operations of a size adequate to reach its objective," Draghi said.
Draghi announced no immediate action. "Over the coming weeks, we will design the appropriate modalities for such policy measures."
The words about adequate size appeared to address concerns that an earlier ECB intervention was not big enough to impress bond markets. That effort began in May 2010 and has been left unused since March after it did not decisively lower borrowing costs.
Financial markets appeared unimpressed by Draghi's comments that the bank was preparing a new approach to get a grip on Europe's debt crisis.
Before Draghi's statement, stocks and the euro were buoyant. As he spoke they both went into reverse.
In Europe, Germany's DAX was down 1.4 percent at 6,657 while the CAC-40 in France fell 1.3 percent to 3,278. The FTSE 100 index of leading British shares was down 0.7 percent at 5,675.
The euro was 0.2 percent lower at $1.2215.
In his comments, Draghi was careful to add that the bank would be acting independently to determine monetary policy and interest rates. It is forbidden by the EU treaty from using its monetary powers just to support government finances.
He said the eurozone governments "must stand ready" to use their bailout funds, the European Financial Stability Fund and its successor, the European Stability Mechanism, in direct market interventions themselves. Countries would have to ask for that help first, which would take time, while the ECB can act at any time.
The bailout funds could play a key role because they can enforce tough conditions in return for help, such as further economic reforms. That way the bond market intervention could take pressure off governments while not undermining governments' resolve to cut their deficits and clear away regulation that slows growth and makes debt harder to pay.
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