LONDON — The European Central Bank stepped up its efforts to contain the continent's government debt crisis, as ECB head Jean-Claude Trichet announced the bank will prolong special measures that 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, and the euro sagged almost a cent during his news conference.

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 mid-afternoon London time, the euro was trading 0.4 percent higher on the day at $1.3180.

Additionally, Portugal's 10-year bonds suddenly rose, taking pressure off the Lisbon government as it struggles to keep borrowing costs from climbing out of reach and having to follow Greece and Ireland in seeking an bailout from its partner governments in the euro and the International Monetary Fund.

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.

Markets widely expected the bank would step up and do more, given the potential consequences in the peripheral countries of Greece, Ireland, Portugal and Spain. The EU's top monetary official, Olli Rehn, openly lobbied for the bank to take action.

The ECB decided that it will prolong its one-week, one-month and three-month funding operations will continue at a fixed rate and at full allotment through to the first quarter of 2011. Those operations steady banks and reduce anxiety in the financial system by offering them all the short-term credit they want at the bank's record low rates.

Trichet indicated that those measures could be extended further if needed and that the central bank kept its mind open to increasing its bond buying program.

"We are constantly looking at the situation of the markets and at the acute tensions," Trichet said.

Though Trichet said the bond buying program was "ongoing" and that he had never said what the limit of the program was, many in the markets had been predicting that the ECB would indicate that it was stepping up the pace.

The euro and government bonds have been buoyed over the past couple of days in hopes that more bond buying would keep government bond prices up and interest yields down.

So far, the ECB is thought to have made around €65 billion in direct bond purchases. The policy has proved controversial and Germany's representative on the governing council Axel Weber had recently called for the program to be axed.

Unlike the Federal Reserve, the ECB's bond purchases are not considered to expand the supply of money in the economy because the central bank "sterilizes" its bond purchases — as well as putting money back into the financial system through its bond buys, the ECB takes money out elsewhere.