Spiralling fears about the financial health of Greece and now also Italy and Spain have gradually frozen up traditional interbank lending markets over the past month, forcing banks to make greater use of the ECB's limit-free loans. On Tuesday, 192 institutions borrowed a combined 265.5 billion euros of 7-day funding from the central bank, a new 2-1/2 year high. On Wednesday, another 38.6 billion euros was taken in longer-term 3-month loans. The extra liquidity, in tandem with a growing belief the ECB will cut interest rates next week, is helping counteract the increased reluctance within the banking sector to lend to all but the safest peers and only for short spells. Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell for the first time in over two weeks on Wednesday to 1.473 percent from 1.477 percent. Six-month rates dropped to 1.701 percent from 1.706 percent while 12-month rates fell to 2.035 percent from 2.044. Shorter-term one-week rates -- most heavily influenced by excess liquidity, which currently stands at a hefty 287 billion euros according to Reuters calculations -- inched down to 0.904 percent from 0.905 percent. Overnight rates bucked the trend, edging up to 0.718 percent from 0.713 percent. The ECB has already reinstated some of its most potent crisis-fighting tools in recent months in a bid to calm the escalating tensions and is currently mulling the possibility of extending liquidity loans to up to three years, people familiar with the matter say.