The Associated Press

London • The European Central Bank stepped up efforts to contain the continent’s government debt crisis, as bank president Jean-Claude Trichet announced it would prolong measures to provide ready cash to banks and steady the financial system.

Markets were initially disappointed Thursday when Trichet did not say the bank would go even further and increase its purchases of government bonds. The euro sagged almost a cent during his news conference.

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But it quickly bounced back, trading higher on the day on market chatter that the bank might in fact be quietly buying bonds of financially troubled eurozone countries — despite Trichet’s reticence on the issue.

By late-afternoon London time, the euro was trading 0.2 percent higher on the day at $1.3164.

Additionally, the 10-year bonds of both Ireland and Portugal suddenly rose.

For the Portuguese government, that’s a big relief as it struggles to keep borrowing costs from climbing out of reach and having to follow Greece and Ireland in seeking a bailout from its partner governments in the euro and the International Monetary Fund.

"This gave the impression of increased activity on behalf of the ECB in those markets," said Elwin de Groot, an economist at Rabobank International.

The bank, the European Union and the 16 governments that share the euro are struggling to contain a crisis caused by too much state debt in some countries. They are trying to reassure bond investors that countries will not default and keep the interest rates on their debt loads from rising so high they can no longer afford to borrow.

Governments are slashing spending and raising taxes to cut their deficits, but that has raised fears that austerity will slow growth and make debt even harder to pay.

By offering more support for the economy, Trichet has clearly changed course from last month’s meeting, when he indicated Europe was doing well enough for the bank to gradually phase out its emergency liquidity measures.

Last weekend’s crisis bailout of Ireland changed all that however. Now markets are worrying Portugal and even much larger Spain might join Greece and Ireland in needing a bailout.