ECB President Mario Draghi said on Thursday that the eurozone’s new rescue fund, the European Stability Mechanism (ESM), “is not eligible” to borrow extra funds from the European Central Bank (ECB).

“The current design of the ESM does not allow it to be recognized as a suitable counterparty” for ECB loans, Mr. Draghi said, adding that the legal service of the Frankfurt-based bank had already ruled out that option in February.

Further, he said that the ECB “may” restart its bond-buying programme to reduce the borrowing costs of troubled eurozone countries.

The ECB “may undertake outright open market operations of a size adequate” to reduce bond yields, Mr. Draghi said. He added that market jitters related “to fears about the irreversibility of the euro are unacceptable and need to be addressed.”

"Investors’ concerns about the ECB’s senior creditor status, which gives it priority on debt repayments, prompting private sector lenders’ fears that they might be shortchanged in case of a default would be addressed", said Mr. Draghi

He also called on governments to “stand ready to activate (the eurozone bailout funds) in the bond markets "with strict and effective conditionality.”

Mr. Draghi admitted that Germany’s central bank has “reservations” about the European Central Bank (ECB) buying the bonds of troubled eurozone governments.

Alluding to German concerns, he said Thursday’s decision to task the ECB’s technical committees “to design the appropriate modalities for bond purchases had been “basically unanimous with one reservation.” In a break with past market interventions, Mr. Draghi said the ECB would adhere to a “full transparency” policy by naming the countries which are benefiting from its bond purchases.

Meanwhile, the ECB held rates at their historic low of 0.75 per cent on Thursday.