The European Central Bank on Thursday cut interest rates for the second straight month and unveiled a new strategy to pump money into cash-strapped banks, in new efforts to bolster the ailing economy and financial system on the continent.

As European heads of state gathered in Brussels for a potentially fateful series of meetings meant to develop a new path forward for integrating the nations’ fiscal policies, the central bank for the 17 nation euro zone was meeting in Frankfurt, Germany, offering its own response to the deepening crisis.

Financial markets on Thursday were making their task more difficult. Borrowing costs soared for Italy, Spain, and even more financially solid France, as investors lost confidence that a resolution would be reached soon. By 11:00 a.m. Eastern time, the yield on 10-year Italian bonds had soared by 0.43 percentage points, to 6.39 percent, and the Spanish 10-year yield was up 0.35 percentage points to 5.72 percent.

Global stock markets fell, with the German Dax index down 1.5 percent and the Standard & Poor’s 500 index down 1.2 percent. The euro currency was down 0.8 percent against the dollar, to $1.33.

To address a “significant downward revision” to the economic outlook, as ECB President Mario Draghi put it, the ECB slashed its main target for short-term interest rates to 1 percent, from 1.25 percent. With the action, it has now fully reversed rate increases from earlier in the year that were aimed at combating inflation, in effect acknowledging that the debt crisis afflicting many European nations is dragging the continent into recession.

And the ECB has expanded its program to support the banking sector, offering unlimited amounts of three-year loans to European banks. The central bank had previously offered one-year loans. The ECB also relaxed rules for what it will accept as collateral for the loans — accepting securities rated “A” by major credit rating firms, as opposed to the previous requirement of AAA-rated collateral.

It was only the second meeting as ECB president for Draghi, and he has cut interest rates at both of them. But even as he unveiled new steps to address Europe’s spiraling crisis, he resisted calls that the central bank intervene more aggressively to deal with it, in particular buying bonds of Italy, Spain, or other countries to help lower their interest rates.

Draghi said the central bank’s governing council did not discuss any efforts to cap those yields.Those comments were a factor in pushing the interest rates those countries must pay to borrow money higher.

Draghi also threw cold water on the notion that the crisis could lead to a break-up of the common euro currency.

“What looks like a spiral of self-fulfilling negative confidence will stop,” Draghi said at a news conference. “I don’t think it’s really useful to speculate on break-ups or things like that. In spite of everything, it seems quite far-fetched.”

The decision was not unanimous, Draghi said. “Opinions were divided. There was a lot of discussion that didn’t lead to unanimity.”

“It was a lively discussion, but one should not use that word ‘lively’ because we are central bank governors after all,” he said.

Separately Thursday, the Bank of England left its monetary policy unchanged, proceeding with a policy of buying British government bonds to try to pump money into the economy and guard against economic contagion from Europe.