European Central Bank's Draghi says Greece reaping rewards from its economic reforms

European Central Bank President Mario Draghi said Monday that the bank stands ready to buy government bonds if inflation in the 18-country eurozone fails to rise as anticipated, a hint that helped shore up stock markets and put pressure on the euro.

Addressing lawmakers of the European Parliament on Monday, Draghi said the bank's governing council remains unanimous in its commitment to using additional unconventional instruments within its mandate.

"Other unconventional measures might entail the purchase of a variety of assets, one of which is government bonds," Draghi said.

The ECB is tasked with ensuring price stability across the 18-country eurozone, which it defines as annual inflation of just below 2 percent. In the year to October, inflation stood at only 0.4 percent. Draghi said the bank continues to expect inflation will remain at current levels for a few more months but that it will start rising again next year.

Though the ECB has cut interest rates to record lows and backed the purchase of some types of private-sector bonds, it has refrained from following other central banks such as the U.S. Federal Reserve and the Bank of England in buying government bonds — so-called quantitative easing, or QE.

Proponents of QE reckon that the policy could help shore up the European economic recovery by reducing borrowing costs across the board for businesses, households as well as governments.

Most ECB watchers think it is unlikely to back large-scale government bond purchases at its next meeting in December but that it remains a possibility if the eurozone economy fails to pick up momentum early next year or if inflation turns to deflation. A sustained drop in prices can choke economic activity if consumers put off purchases in the hope of bargains down the line.

Stocks were buoyed by Draghi's comments — a QE program would create new money that often ends up in financial markets. Both Germany's DAX and France's CAC-40 stock indexes turned around during Draghi's testimony with both trading 0.7 percent higher toward the close.

The euro was also pressured by Draghi's comments, trading 0.6 percent lower at $1.2461. The prospect of more money in the system tends to weaken the currency.

Draghi said monetary policy alone can only do so much and once again urged governments across Europe to pursue structural reforms. Monetary policy works better alongside reforms, he said.

Specifically, he singled out Greece as a country that is seeing the benefits "accruing" from its wide-ranging economic reforms. Greece grew by a quarterly rate of 0.7 percent in the third quarter. That made Greece, which has contracted every year since 2008, the fastest-growing eurozone economy in the quarter.