The President of the European Central Bank Mario Draghi has said the ECB is preparing a new bond buying programme.
But Mr Draghi said it could only apply to governments of countries that have entered formal programmes with the EU bailout funds.
Market reaction has been negative so far with stock market falls, and the cost of Spanish and Italian debt rising.
Mr Draghi announced some big changes in policy by the ECB, notably stating that the bank is to make detailed preparations to intervene in sovereign bond markets to lower borrowing costs for some euro zone states, and counter investor fears of a euro zone break up.
But he said the first step had to be taken by governments, who had to ask for a formal bailout programme from the rescue funds, the EFSF and ESM. Only then could the ECB act.
It would do so by buying up short term government bonds, which Mr Draghi said would help bring down the cost of long term borrowing, and put pressure on governments to carry through reform programmes.
He also indicated the ECB could give up its seniority - or right to be paid back before private bondholders - something that has discouraged private bondholders from investing in weaker euro zone countries.
Mr Draghi ruled out the granting of a banking license to the ESM, saying it was not currently acceptable under the ECB's rules.
He said the ECB would consider other "non-standard" measures to combat the euro zone crisis, and asserted the euro was here to stay, that there was no going back to the Lira or the Drachma.
He admitted that Germany was the only country opposed to today's moves.
Fianna Fáil finance spokesman Michael McGrath has criticised the council, describing the outcome of today's meeting as "deeply disappointing".
Mr McGrath said the ECB had once again "flattered to deceive", and said the remarks by ECB president Mario Draghi were unlikely to calm the markets, who were expecting a much clearer direction from him.
Euro zone economic weak and uncertainty hitting confidence
Mr Draghi also said that euro zone economic growth is weak and uncertainty about the outlook is weighing on confidence in the bloc. He also said the euro crisis would not destroy the currency bloc.
He added that high yields are unacceptable and that the underlying pace of monetary expansion is subdued.
Mr Draghi said the ECB will discuss loosening its collateral rules further next month and could repeat previous measures like its injections of long-term, ultra-cheap loans. "There will be a discussion of the collateral framework which is foreseen for September," Draghi said, adding that the ECB also had the option to offer banks more long-term loans.
The ECB funnelled €1 trillion into the banking system with twin three-year loan operations in December and February, but banks are still parking a large part of the funds back at the ECB rather than lending to each other, firms or consumers.
At today's press conference, the ECB boss also signalled little risk of inflation in the euro area over the medium term. He said higher VAT rates to raise money for governments and higher energy prices are the main inflation risks
On the issue of a banking licence for the ESM, Draghi said he was surprised at the amount of attention this has received. He repeated that the design of the ESM means it is not up to the ECB to give a banking licence, but it is up to the governments of the euro zone states.
Draghi has come under intense pressure from investors, European leaders and even the US to deliver on his pledge to do whatever it takes to save the euro by bringing high borrowing costs down and salving the debt crisis.
His comments in London last Thursday that the ECB would do whatever it takes within its mandate to protect the currency bloc from collapse - "and believe me, it will be enough" - had already eased tensions on the debt markets.
Other countries, especially the US, have raised pressure on the ECB to act as the two and a half year old euro zone crisis weighs on global growth.
The US Federal Reserve dashed expectations among some investors last night by taking no immediate new measures to revive the economy there.
The Fed stopped short of offering new monetary stimulus, though it signalled more strongly that further bond buying could be in store to help a US economic recovery that it said had lost momentum this year.
Earlier, the Bank of England kept UK rates steady at 0.5% and opted to make no change to its QE policy today.
