European Central Bank head Mario Draghi yesterday said the bank is ready to intervene in the bond market to drive down countries' high borrowing rates, and urged European leaders to get their bailout fund ready to intervene as well.

Draghi said the ECB could buy bonds if the borrowing rates stop the bank in its efforts to spread its low interest rates throughout the 17 countries that use the currency.

Such a move could, crucially, lower the borrowing rates that are threatening to push Spain and Italy into financial disaster.

The ECB "may undertake outright open market operations of a size adequate to reach its objective," Draghi said.

Draghi announced no immediate action. "Over the coming weeks, we will design the appropriate modalities for such policy measures."

The words about adequate size appeared to address concerns an earlier ECB intervention was not big enough to impress bond markets. That effort began in May 2010 and has been left unused since March after it did not decisively lower borrowing costs.

In his comments, Draghi was careful to add that the bank would be acting independently to determine monetary policy and interest rates. It is forbidden by the EU treaty from using its monetary powers just to support government finances.

He said the eurozone governments "must stand ready" to use their bailout funds, the European Financial Stability Fund and its successor, the European Stability Mechanism, in direct market interventions themselves.