As Summit Looms, ECB Slashes Rate Again

Meanwhile, Merkel and Sarkozy try to drum up support for plan
By Kevin Spak,  Newser Staff
Posted Dec 8, 2011 7:47 AM CST
As Summit Looms, ECB Slashes Rate Again
People walk in front of a restaurant displaying a giant sticker of a Euro coin on its window and offering pizzas for one euro in the center of Madrid on December 08, 2011.   (Getty Images)

The European Central Bank slashed rates for the second time in as many months today, ahead of a crucial EU summit that could determine the fate of the euro. Analysts had expected the cut, which brings the key rate from 1.25% down to 1%, but sources tell Bloomberg that the ECB may do even more to kick-start bank lending, like lowering collateral standards. "They will also keep open the option to go below 1% on rates," predicted one banker. "That's no longer the magic floor."

European leaders will meet in Brussels today to discuss the fate of the euro zone, with France and Germany pushing for a deal that would require far greater budget discipline from the 17-member block, imposing automatic sanctions for any that don't balance their budget. Angela Merkel and Nicolas Sarkozy are meeting with fellow conservative heads-of-state today to drum up support for the plan ahead of the summit, the AP reports. Adding to the urgency is Standard & Poor's threat to downgrade all 17 euro zone nations. (More European Central Bank stories.)

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