The European Central Bank has agreed to launch a new and potentially unlimited bond-buying programme to lower borrowing costs for struggling eurozone countries.

ECB President Mario Draghi had pledged in July to do whatever it takes to preserve the euro.

Mr Draghi said today the new plan would address bond market distortions and "unfounded" fears of investors about the survival of the euro.

The scheme, which the Bundesbank has opposed, will focus on bonds maturing within three years and is within the ECB's mandate.

The ECB will also buy bonds of countries that are exiting an existing programme and attempting to transition back to market financing.

This is particularly important for Ireland, where the EU/IMF programme ends in 14 months.

Only one member of the ECB Governing Council had dissented, Mr Draghi said.

"Under appropriate conditions, we will have a fully effective backstop to prevent potentially destructive scenarios," Mr Draghi told a news conference after the central bank's monthly meeting.

"No ex-ante quantitative limits are set on the size of outright monetary transactions," he said, using the formal term for ECB bond-buying programmes.

Investors were on tenterhooks, waiting to hear how decisively the ECB would act to help bring down the borrowing costs of Spain and Italy, after disagreements among policymakers on the plan were played out in public last week.

Mr Draghi's statement at least met expectations, analysts said.

With the bond-buying plan the focus of today’s meeting, the ECB kept interest rates on hold, leaving its main rate unchanged at 0.75%.

Pressure on Mr Draghi intensified after an unsubstantiated German newspaper report last week that Bundesbank chief Jens Weidmann had considered resigning over his opposition to bond-buying, although several sources say he has made no such threat and believes in staying at the table to argue his case.

The Bundesbank chief had expressed concern that intervening in the bond market would break the ECB taboo of financing eurozone member states.

Other ECB policymakers see a greater urgency to help Spain and Italy and prevent the eurozone crisis from deepening.

Mr Draghi said the ECB would only help countries that signed up to and implemented strict policy conditions, with the eurozone's rescue fund also buying their bonds, and preferably with the IMF involved in designing and monitoring the conditions.

Renewed ECB intervention in the eurozone's bond markets is crucial to buy time for governments to come up with a longer-term response to the union's debt crisis, which began in early 2010.

Spanish and Italian government bond yields have fallen significantly since Mr Draghi said on 2 August that the ECB would buy bonds issued by the two countries.

They fell further after Mr Draghi fleshed out his plan to intervene today.

Elsewhere, the Bank of England has kept its key lending rate at 0.5% and decided not to increase its economic stimulus programme of bond purchases.