Markets should not underestimate Europe’s determination to resolve the escalating eurozone crisis, Jean-Claude Trichet, European Central Bank president has warned as he left open the possibility of the bank significantly expanding its government bond purchases to drive down surging borrowing costs.

The hint that the ECB could recalibrate its response to the unfolding crisis came as the premiums that Italy and Spain pay over German benchmark interest rates hit fresh highs since the launch of the euro. The currency’s monetary guardian had already stepped up purchases of Portuguese bonds, traders reported.

The ECB’s bond purchase programme has been controversial within its governing council since its launch in May, with Axel Weber, president of Germany’s Bundesbank, voicing his opposition publicly. But the pace at which the crisis has spread has altered the debate in the ECB, which could justify stepping up its intervention by arguing that governments’ borrowing costs were far out of line with fundamentals, signalling dysfunctioning markets.