FRANKFURT — The European Central Bank on Thursday announced a sweeping program for buying the bonds of troubled eurozone countries, giving the bank potentially unprecedented power.
While the bank’s president, Mario Draghi, insisted that the central bank was not violating a prohibition on its financing governments, it was effectively becoming lender of last resort to countries as well as banks.
‘‘We will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area,’’ Draghi said during a news conference. ‘‘The euro is irreversible.’’
Germany’s chancellor, Angela Merkel, affirmed after a meeting with the Spanish prime minister, Mariano Rajoy, in Madrid on Thursday that the central bank acted ‘‘with independence and within the framework of its mandate.’’ But in fact, Germany’s Bundesbank was the lone vote against the central bank’s bond plan, arguing that it was ‘‘tantamount to financing governments by printing banknotes.’’
The program was designed to reduce the borrowing costs of Spain and Italy, to help them roll over their debts and get their economies moving again after two years of crisis. But such aid would not be automatic.
In essence, the central bank left the next step to the beleaguered governments. They would be required to ask the central bank formally to start buying their bonds in the open market and would have to agree to follow detailed conditions for paying down their debt and hewing to fiscal discipline.
While such programs will be overseen by other EU governments, it would ultimately be up to the central bank to determine whether the terms of the agreement were acceptable, and whether the government was meeting those conditions over time.
By forcing governments to impose fiscal discipline on each other and remake their economies along lines dictated by the ECB, power will inevitably drift from national capitals to Frankfurt, where the central bank is based, and Brussels, the administrative seat of the European Union.
Major stock indexes in Europe and the United States rose strongly Thursday after the announcement.
Draghi did not give an exact starting date for the bond purchase program, saying it depended on action by governments. A government must request help and agree to a ‘‘macroeconomic adjustment program’’ with the European rescue fund. But the central bank said this could be a so-called precautionary program, implying that it would be less onerous than the programs agreed to by countries like Portugal or Ireland.
The central bank will buy bonds with maturities of three years or less, and it will withdraw as much money from circulation as it adds by buying bonds. This is intended to forestall inflation.
The bank will not treat itself as a preferred creditor, entitled to get paid before other bondholders if a country defaults. But it will not take losses on Greek bonds it already holds, even though private creditors were required to do so.
The European Central Bank also announced it would hold interest rates at their record-low level of 0.75 percent. The bank has cut its main interest rate three times since Draghi became president in November, but he and other central bank officials have complained that market interest rates have remained stubbornly high in the countries most desperately in need of credit.
Small companies in Spain and Italy pay more than 2 percentage points more for loans than their German counterparts, according to the central bank’s data. The higher interest rates make it even more difficult for companies to invest and for those economies to recover.
The bond-buying strategy could prevent borrowing costs for countries like Italy and Spain from becoming too high for the governments to afford. But bond buying is also designed to help companies, because market interest rates tend to track the rates paid by governments.
The International Monetary Fund, part of the troika helping to finance sovereign bailouts in Europe, applauded the news, having publicly called for the central bank to do more.