FRANKFURT, Oct 2, 2008 (AFP) - The European Central Bank (ECB) on Thursday renewed one-day loans to stressed money markets of 50 billion dollars (35 billion euros) in what has become a regular effort to keep credit flowing.

Demand for the funds remained strong, with 55 banks requesting a total of more than 67 billion euros and paying 2.75 percent for what was on offer, an ECB statement indicated.

In a separate operation, the ECB said later that it had also withdrawn 200 billion euros (280 billion euros) in surplus cash from eurozone money markets now that the end of the third quarter had passed.

An overnight loan of 50 billion dollars on Wednesday had been met with strong demand, and banks had sought a total of 70.927 billion dollars, while paying a rate of 3.25 percent for the funds that were available.

The euro withdrawal on Thursday took place at the bank's benchmark interest rate of 4.25 percent for funds the ECB has calculated the banks no longer need.

A similar operation on Wednesday allowed the bank to siphon off 173 billion euros, somewhat less than expected, but a day later it was fully subscribed.

Money markets had been generously supplied with euros to ease tension at the end of September, when commercial banks squared their books before heading into the fourth quarter.

But the ECB carefully monitors the amount of cash in circulation and adjusts it through so-called 'fine-tuning' operations that keep rates close to its benchmarks and prevent excess supply from fueling inflation.

Commercial banks generally lend and borrow cash from each other on interbank markets but these have dried up since the US market for high-risk, or subprime, mortgages collapsed more than a year ago.

The ECB and other major central banks have been pumping huge amounts of cash in the form of loans to ease turmoil stemming from the latest crisis in the US financial sector, after the investment bank Lehman Brothers went bankrupt last month.

Some analysts question whether the central bank moves are working however, saying that commercial lenders soak up the extra cash but do not lend to each other or extend it as credit to businesses.

They reportedly use some of the funds to buy government treasury bills because they are presently considered one of the safest investments.