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. (Read more European Central Bank stories.)