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ECB likely to extend support for banks

The European Central Bank is expected to extend the emergency support to eurozone countries until early 2011.

THE EUROPEAN CENTRAL Bank is expected to extend emergency support for euro-zone banks until early next year.

The guarantee is being extended as the ECB determines the effects that a possible US economic – or global -  slow-down would have on eurozone countries.

Although eurozone growth is exceeding expectations, the possibility of a double-dip recession in the US and the economic shakiness of some European countries is a concern for the ECB.

ECB president Jean Claude Trichet is expected to announce the extension of the support on Thursday. It will be the third year for an unlimited liquidity provision to be extended.

As bank lending to businesses is continuing to contract, the EBC does not believe that recovery is yet self-sustaining.

The ECB’s interest rate is expected to remain at the record low of 1%.

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