The ECB will probably say on Thursday that it will re-start its dormant government bond buying programme with the aim of lowering Spanish and Italian government bond yields, a Reuters poll of money market traders showed.

Financial markets are looking for a clear policy response from the central bank at its meeting this week after its President, Mario Draghi, vowed last week that "the ECB is ready to do whatever it takes to preserve the euro."

Nineteen of 24 euro money market traders said the ECB will soon re-start the Securities Market Programme (SMP) with 10 of those 19 saying the ECB will announce it on Thursday.

Six expect that to happen in September, two said at a later date, and one did not specify when. "The best possible action that the ECB can take is the SMP," said a money market trader. Traders were split on whether the ECB would conduct another Long-Term Refinancing Operation (LTRO) following twin three-year operations where the ECB lent euro zone banks over a trillion euros and managed to temporarily get yields down.

"I think a third LTRO is quite unlikely at this stage. It may actually work against them," said Rabobank's senior market economist Elwin de Groot. "The first thing still in my mind is something that involves purchases of government bonds." The ECB has left the SMP untouched for almost three months now after spending 211.5 billion euros. But the last significant use of the programme was half a year ago, back in January. The ECB has been under tremendous pressure from the euro zone, and outside, to bring soaring sovereign bond yields in Italy and Spain under control as the debt crisis threatens the euro's existence and the health of the world economy. But the SMP bond-buying programme has had only limited success in the past. The ECB would like to see Europe's permanent bailout fund start buying the bonds of troubled euro zone members, but the fund's limited firepower could make its intervention less effective.

Traders said the ECB would persuade these rescue funds -- the European Financial Stability Facility/European Stability Mechanism -- to buy government bonds in the secondary market, but they were divided on when. Seventeen of 24 euro money market traders said the ECB would grant the ESM a banking license. That would allow it to exchange bonds it buys to support highly indebted countries for fresh cash from the ECB, increasing its firepower without additional government funds. (C ) Reuters