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)

(Newser) – 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."

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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. (Read more European Central Bank stories.)

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