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ECB launches eurozone rescue plan
A rescue plan for the eurozone has been launched amid more dire warnings about the impact the debt crisis is having on the UK economy.
The European Central Bank (ECB) said it will buy up government bonds of eurozone countries to help bring down their borrowing rates. It represents the clearest sign yet that ECB president Mario Draghi is willing to live up to his pledge to do "whatever it takes" to save the single currency.
Investors cheered the decision as European stock markets surged, with the FTSE 100 Index up nearly 2%, Germany's Dax ahead 2.6% and France's Cac-40 adding nearly 3%.
The move came as think-tank the Organisation for Economic Co-operation and Development warned the eurozone remained "the most important risk for the global economy".
The ECB decision is likely to irk the German government as the scheme has faced intense opposition from German central bank chief Jens Weidmann, who believes it falls outside the ECB's mandate.
The yields on Spanish and Italian 10-year bonds dropped after the announcement, in a sign the move had restored confidence in some investors, while European stock markets remained firmly ahead.
Carsten Brzeski, economist at ING Bank, said: "All in all, the ECB has presented a big new bazooka which should help buying time."
Earlier in London, the Bank of England refrained from boosting its quantitative easing programme at £375 billion and held interest rates at record lows of 0.5%.
The ECB programme, which will be known as the Outright Monetary Transaction, will replace the previous programme and see the central bank buying bonds between one and three-year terms and will have no limits.
Participating countries that have their bonds bought will have to accept certain conditions which will be part-monitored by the International Monetary Fund.