ECB cuts benchmark interest rate to 0.5 percent

FRANKFURT, Germany - The European Central Bank cut its key interest rate to a record 0.50 percent Thursday and announced other measures to spur lending and help lift the eurozone out of a stubborn recession.

ECB president Mario Draghi said the bank was prepared to flex its muscles further in the face of high and rising unemployment and growing evidence that Europe's economy is getting weaker.

He said the ECB stood "ready to act if needed," but implored European governments - which responded to the region's debt crisis by slashing spending - to do more to stimulate economic growth.

On Wednesday, the Federal Reserve signaled it would not rule out more action to boost growth, and chairman Ben Bernanke warned America's political leaders that their policies were holding back the economy.

The ECB lowered its benchmark refinancing rate from 0.75 percent, as expected, at a meeting of its rate-setting council in Bratislava, Slovakia. Out of concern that Europe's financial industry is lending too cautiously and holding back investment, the ECB also extended its offer of unlimited cheap loans to banks at least through July 2014. Previously, it had planned to end the program as soon as this July.

To jolt banks into lending more freely, Draghi said the ECB would even consider charging banks to deposit funds. Since 2008, the ECB has reduced the interest rate it pays on banks' deposits from 3.25 percent to zero, creating an incentive for them to lend.

Together, the measures amount to a grim recognition. Despite record-low interest rates, European banks and companies remain risk-averse.

Draghi also delivered a warning to political leaders: Extraordinary actions by the central bank will not be enough to heal the 17-nation eurozone's economy. Governments need to accelerate efforts to cut excessive regulations and make Europe a more hospitable place for business.

The ECB says the eurozone economy will shrink 0.5 percent this year, and unemployment is at 12.1 percent.