European Central Bank chief Jean-Claude Trichet insisted today that the bank did not bow to political pressure in buying public debt as part of an EU bail-out and remained totally independent.
'We are fiercely and totally independent. This decision is the decision of the governing council and not the result of any kind of pressure of any sort,' Trichet said.
As part of a €750 billion rescue package for euro zone economies, the ECB said it would intervene in 'public and private debt securities markets to ensure depth and liquidity.'
Analysts said the move compromised the ECB's independence. But Trichet said that the ECB's governing council had made its decision 'taking into account the circumstances to do what we had to do, totally independently of any kind of signalling or suggestion or whatever.'
Trichet insisted that the ECB had made its own judgment that 'the normal transmission of our monetary policy was hampered' and that a number of markets were 'dysfunctional'.
'That is the reason why we took our decision,' he said.
He also stressed that it was crucial that the governments committed to taking all necessary measures should meet their fiscal targets.
Plan restores confidence, says Barroso
Meanwhile, EU Commission President Jose Manuel Barroso said the euro zone was regaining investors' confidence following the decision to create a €750 billion emergency fund to fend off the debt crisis.
'The euro zone is certainly regaining confidence. Our fundamentals are certainly good,' Barroso said on the sidelines of an economic conference in Brussels.
Global financial markets and the euro have responded positively to the decision by EU finance ministers overnight to launch a special fund that will consist of up to €500 billion from the EU and €250 billion from the IMF.
Borrowing costs also came down sharply, with the yield - or interest rate demanded by investors - on Greek 10-year bonds falling to just below 8%. Portugal's 10-year yield came down from over 6% to 4.81%, while Ireland's dropped by more than a percentage point to 4.75%.
Read the statement after the meeting here
See how the markets performed here
'Shock and awe' plan surprises analysts
The plan, hammered out by European Union finance ministers, central bankers and the International Monetary Fund in weekend negotiations, was the biggest since G20 leaders threw money at the global economy following the collapse of Lehman Brothers in 2008.
'We have closed ranks to save the euro,' French Finance Minister Christine Lagarde said after the 11-hour meeting in Brussels ended in the early hours of this morning.
The 'shock and awe' scale of the package of standby funds, loan guarantees, liquidity measures and central bank bond purchases surprised financial analysts and the euro rose some 2% in early trade.
In a move sought by anxious European banks, the European Central Bank also said it would buy euro zone government bonds in a reversal of its long-standing reluctance to use what many economists call the 'nuclear option' under market pressure.
Finance Minister Brian Lenihan said it was a credible plan which should restore confidence in the euro.
German Chancellor Angela Merkel, who for months resisted pressure to aid Greece with a debt crisis that eventually sent market tremors around the world, said the measures were necessary to guarantee the future of the euro.
'This package serves to strengthen and protect our common currency,' she said.
Merkel consented to the massive rescue plan after her centre-right coalition lost a regional election on Sunday and US President Barack Obama and French President Nicolas Sarkozy telephoned her to ensure Europe would take the necessary steps to support the euro and keep global liquidity flowing.
In concerted action, the US Federal Reserve reopened currency swap lines with several central banks to try to assure markets of dollar liquidity and the European Central Bank said it would buy government debt to steady investor nerves.
However, sceptics questioned whether the euro zone could hold together over the long term and underpin a fragile currency union with stronger political and fiscal instruments.
The emergency measures are worth much more than any previous attempt by the 27-nation European Union or the 16-state single-currency group to calm markets.
EU Monetary Affairs Commissioner Olli Rehn told a news conference the package 'proves we shall defend the euro whatever it takes'.
The agreement was reached after the crisis over debt-laden Greece drove sovereign debt yields and insurance on this debt to record levels, which Sweden's finance minister blamed on the 'wolfpack behaviours' of financial markets.
Financial markets had punished euro zone members with big budget deficits such as Portugal, Spain and Ireland, threatening to plunge them into Greece's plight, in turn roiling global markets.
The package consists of €440 billion in guarantees from euro area states, plus €60 billion in a European stabilisation fund that could be disbursed to help euro zone states if needed on strict austerity conditions.
EU finance ministers said the International Monetary Fund would contribute up to €250 billion, taking the total to €750 billion, or around $1 trillion.
IMF head Dominique Strauss-Kahn said any action by the global lender would be on a country-by-country basis.
The ECB said it will buy euro zone government bonds to help support fractured markets, abandoning resistance to full-scale asset purchases just days after ECB President Jean-Claude Trichet said the idea had not even been discussed.
It said in a statement the step by many economists, was justified because of government promises to meet strict budget targets and step up consolidation efforts.
The ECB said the scope of the purchases was yet to be determined and they would be offset by liquidity-absorbing operations so that the stance of monetary policy is unaffected.
The ECB last year announced a €60 billion programme to buy covered bonds but this would be its first move into buying government debt.
Both the EU and the IMF has already approved a €100 billion package to support Greece, whose budget deficit blew out last year to 13.6% of GDP.
To secure the funds, Greece has committed to deep budget cuts that have already caused violent public protests in the country as it moves to get the deficit back down to the EU limit of 3%.
Policymakers around the globe are worried the crisis in Greece could spread to other countries, fears compounded by the unexplained shock plunge in US stocks on Thursday.
