ECB slashes interest rates in latest effort to aid Europe's recovery Interest rates on the central bank's overnight deposit facility hit the floor at zero percent, down from 0.25 percent, an attempt to encourage banks to lend to each other rather than parking their money with the ECB. But the cuts mean that the bank is approaching the limit of its conventional crisis-fighting policies. It held back from more dramatic and unconventional steps to take pressure off troubled countries, such as announcing it would resume buying up the debt of troubled countries. In Britain, the Bank of England announced that it was expanding its stimulus program by $78 billion, bringing the total to $585 billion, another sign of fear about slumping European economies by central banks. Though Britain does not use the euro, its central bank has in recent weeks taken step to pour money into its economy in an attempt to forestall recession. The ECB change had been expected after euro-zone leaders took major new steps last week to forge a stronger shared financial system and ease the terms with which countries can use bailout money. The bank's decision appeared to again walk the tightrope between reducing the possibility of immediate economic catastrophe while leaving enough undone that Spain, Italy and others remain in serious trouble and still have to pursue economic measures to make their finances more sustainable. That approach is shifting Europe's crisis response from the tense equivalent of defusing a live bomb to a more protracted, ongoing negotiation that will last for years. The euro zone has already held on since late 2009. But major risks remain. On Thursday, Spain held a bond auction in which it found enough buyers for its debt but paid higher rates than last month. Its 10-year bonds averaged a yield of 6.43 percent, up from 6.04 percent at the last auction on June 7. Shorter-term bonds were mixed. European Central Bank President Mario Draghi had in recent months condemned elected leaders for not moving forward with bold steps to unify Europe's disjointed economies. The summit last week gave new powers to the central bank, endowing it with oversight over the euro zone's biggest banks and making it even more key to Europe's path out of crisis. Many analysts nevertheless questioned whether the lowered interest rates would have anything more than a symbolic effect on the euro-zone economy, which earlier this week saw its unemployment rate rise to the highest level since the common currency was created in 1999. With interest rates already so low, the bank's ability to sway the economic situation by cutting rates further is limited. "The prospect that the ECB may have no more readily deployable measures in its toolbox is indeed worrying," said Jens Sondergaard, a senior economist at Nomura, in a research note. The International Monetary Fund urged the ECB this week to lower the borrowing rates of troubled countries such as Spain and Italy by buying up their bonds on the open market. The bank did that last year, temporarily lowering Spain and Italy's borrowing costs, but then it stopped, in part because key bank policymakers felt that their action was akin to directly financing European governments, which is against the bank's rules. Draghi remains one of the most powerful leaders in Europe, since only he has the ability to bypass the continent's messy politics and act unilaterally to flood the market with euros, push down countries" borrowing costs and extend lifelines to banks. Unlike the Federal Reserve, though, the ECB's overriding mission is to combat inflation, not to ensure economic growth. Inflation in the 17-country euro zone has been flat, giving the bank the leeway to pursue a looser monetary policy. Draghi has a mixed record on taking major new steps in the face of crisis. After he became president of the bank in November, he endorsed large-scale measures to boost the flow of money within the euro zone. But he has also shown a steely will to hold out against sweating leaders who warn that they are being choked off from borrowing. At the beginning of June, as borrowing costs in Spain and Italy were soaring to new heights, he held interest rates flat, denying them a break from their pain. That pressure made leaders keener to find solutions at the summit last week, analysts say.