European leaders have broadly welcomed a new plan from the European Central Bank (ECB) to help eurozone members hit by crippling borrowing costs, but it drew criticism from Germany's Bundesbank.

At one of the most highly anticipated meetings in its history, the ECB's governing council on Thursday agreed to allow unlimited bond-buying in a bid to lower debt for struggling eurozone countries.

Mario Draghi, the ECB chief, said the move, aimed at the secondary market, would address bond market distortions and "unfounded" fears of investors concerning the survival of the currency.

Addressing a news conference, Draghi said: "Under appropriate conditions, we will have a fully effective backstop to prevent potentially destructive scenarios."

Stocks have risen strongly, as has the euro and the price of oil, while the costs of borrowing for countries like Spain and Italy has become more manageable.

British Prime Minister David Cameron and French President Francois Hollande, who had been holding talks in London, both welcomed news of the scheme, dubbed "Outright Monetary Transactions" or OMTs.

"I warmly welcome that those steps were taken. It's clearly important for the countries in the eurozone but also important for countries like Britain."

France's Hollande said the ECB had "acted in line with the mandate it has been given" to "safeguard growth in Europe".

Italian Prime Minister Mario Monti, whose country has been punished by investors worried it is at risk from debt crisis contagion, called the plan an "important step forward" for the eurozone.

'Undermine confidence'

The International Monetary Fund also greeted the plan warmly, saying it would lend its support within its own rules.

"We see the ECB's action as an important step toward strengthening stability and growth in the euro area," Christine Lagarde, the IMF managing director, said.

But Germany's central bank - whose chief has been outspoken in his opposition to bond-buying measures - criticised the plan.

"In the most recent discussions, as before, Bundesbank President Jens Weidmann reiterated his frequently substantiated critical stance towards the purchase of government bonds by the eurosystem," the central bank said.

If the scheme led to member states postponing necessary reforms, "this will further undermine confidence in the political leaders' crisis-resolution capability”, the bank added.

German Chancellor Angela Merkel had a tight-lipped reaction, declining to comment except to say the ECB was acting within its mandate.

"The ECB acts within its independence and within its mandate and is responsible for the stability of the currency, the value of the currency, and to take the appropriate decisions," she said.

Markets gain

Jose Manuel Barroso, the European Commission head, also said he believed the ECB was "acting fully within its mandate to maintain the integrity of the monetary policy".

Markets responded favourably to Draghi's plans, with eurozone banks soared 5.9 per cent to five month highs, helping the eurozone's top Euro STOXX 50 index climb 3.4 per cent.

In Europe, Germany's DAX was up 0.8 per cent on Friday, while the CAC-40 in France rose 1.1 per cent. The FTSE 100 index of leading British shares was 0.2 per cent higher.

Wall Street was poised for a solid opening too, with both Dow futures and the broader S&P 500 futures up 0.4 per cent.

The euro rose 0.5 per cent to $1.2688.

In Asia, Japan's Nikkei 225 index surged 2.2 per cent. Hong Kong's Hang Seng jumped 3.1 per cent, South Korea's Kospi bolted up 2.6 per cent, Australia's S&P/ASX 200 rose 0.3 per cent, while the benchmark Shanghai Composite Index jumped 3.7 per cent.

Source: Agencies