FRANKFURT, Germany – The European Central Bank unveiled its most ambitious proposal yet to ease Europe’s financial crisis with a plan to buy unlimited amounts of government bonds to help lower borrowing costs for countries struggling to manage their debts.

The program announced Thursday goes well beyond the ECB’s earlier $264 billion bond-buying program, which was not big enough to have lasting impact.

Large-scale purchases of short-term government bonds should drive up their price and push down their interest rate, or yield, making it less expensive for countries to borrow money and taking pressure off their finances.

“We will have a fully effective backstop to avoid destructive scenarios,” ECB President Mario Draghi said at a news conference, in which he also defended the euro currency union as “irreversible.”

After the ECB plan was announced, the yields on government bonds across Europe fell and stock markets rallied.

“This is a potential game-changer,” says Jacob Kirkegaard, research fellow at the Peterson Institute for International Economics. “This is the first time the ECB has committed its balance sheet in this way. And the way it is done is politically sustainable in Europe.”

The ECB’s 23-member governing council approved the plan with only one dissent member Draghi wouldn’t identify. The head of Germany’s Bundesbank, Jens Weidmann, has publicly opposed the plan, arguing that the ECB is moving too far in the direction of financing government deficits, which is prohibited by the European Union treaty.

The ECB’s pledge of support came with an important caveat: Countries that want the central bank to help with their borrowing costs must first ask the 17 countries that use the euro to buy their bonds with existing bailout funds and they must submit their economic policies to the scrutiny of the International Monetary Fund.

That puts immense pressure on heavily indebted countries such as Spain and Italy — which have been reluctant to seek help from their euro partners — to take the next step in stemming the three-year-old financial crisis.

Spanish Prime Minister Mariano Rajoy refused Thursday to make any commitment to trigger the ECB bond-buying. “When I have something new, I’ll tell you,” he told reporters at a news conference after he met with German Chancellor Angela Merkel.

Italian Prime Minister Mario Monti praised the plan as an “important step forward” but said any decisions on Italy’s potential request for aid were “premature.”

If Spain and Italy were to accept aid from the eurozone’s bailout funds, it would put them in the same group as Greece, Ireland and Portugal — something the two countries have been wary of.

The ECB first said a bond-buying plan was in the works on Aug. 2, and markets have climbed steadily since then. Investors across the globe greeted the release of the more detailed plan with further enthusiasm.

The Dow Jones industrial average climbed more than 230 points in afternoon trading to 13,280. Germany’s DAX index rose 2.9 percent and France’s CAC-40 index surged 3.1 percent. The euro rose 0.33 percent during the day to $1.2636.

“If the current positive market mood continues, the ECB may end up having to buy nothing,” said Marco Valli, an analyst at UniCredit bank in Milan.

Other analysts cautioned that while the ECB plan would provide short-term relief to European countries and financial markets, it doesn’t address underlying economic weakness across the region, which could persist for years. It also exposes the ECB to the risk of governments reneging on aid conditions after receiving help. The bank would then be in a tough spot. Halting bond purchases could reignite the crisis, while continuing them would mean supporting continued failure to reform.

Put simply, buying government bonds does not stimulate growth, which has been hurt in Spain, Italy and other countries, in part, by the need to rein in government spending.

Six countries in the eurozone are in recession — Greece, Spain, Italy, Cyprus, Malta and Portugal — and unemployment across the region is currently at 11.3 percent.

The ECB revised lower its economic forecast for the 17-nation eurozone economy Thursday, saying it would shrink between 0.2 percent and 0.6 percent in 2012. The bank left its benchmark refinancing rate unchanged Thursday at 0.75 percent, a record low.