BBC News
26 July 2012 Last updated at 13:03 GMT
Mario Draghi has promised action to defend the euro
Mario Draghi has promised action to defend the euro
The European Central Bank is ready to do "whatever it takes" to support the euro, its president has said.
Mario Draghi's strong message of support prompted a rally in European share markets and the euro.
They also triggered a fall in bond yields. Spain's 10-year yield, which had hit a record high of 7.6% earlier, fell back to 7%.
Bond yields are an indication of the interest rate a country would have to pay to borrow money.
A rate above 7% is generally seen as unsustainable in the long run.
Speaking at a conference in London marking the start of the Olympics, Mr Draghi said he would do whatever was necessary to stop the eurozone falling apart, including taking action to lower government borrowing costs.
He said: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."
He added that the single currency was irreversible.
His supportive remarks sent the euro 0.5% higher against the dollar to $1.2214.
'Positive' remarks
An auction of Italian two-year bonds on Thursday saw the interest rate investors demanded to lend to the Italian government rise to an eight-month high of 4.86%.
However, demand for the bonds was strong, and the yield on the benchmark 10-year bond fell back in line with Spain's - another positive sign.
The French finance minister, Pierre Moscovici, said Mr Draghi's remarks on government bond yields were "very positive".
Elsewhere in Europe, the president of the European Commission, Jose Manuel Barroso, is visiting Greece for the first time three years for talks.
Greece, which is the worst-affected country in the eurozone is also playing host to international monitors from the European Union, the International Monetary Fund and the European Central Bank, who are there to check how it is getting on with its debt-cutting programme - a condition of its bailout loans.
The three, known as the troika, had a two-hour meeting with the Greek finance minister Yannis Stournaras.
A senior official said that the government had identified proposed spending cuts for the next two years, which he said were likely to be presented to the inspectors later on Thursday.
The eurocrisis has spread its negative effects even further this week with the credit ratings agency Moody's downgrading the outlook for Germany's AAA credit rating to negative, because of the prospect of it having to provide more help to prop up the single currency.
