Needless to say, Microsoft has met every question related to the 50 Euro drop to a solid “no comment”, which could be considered almost a confirmation. It is after all, the Microsoft way to deny things, only to admit them officially when everyone caring already knows about it.
All in all, the price drop is to make the 360 a serious competitor for the Nintendo Wii. The Xbox 360 would retail for 250 Euro (with the Arcade pack down to 197 Euro). In the mean time, the Wii shows a price tag of 234 Euro.
As for the PlayStation 3, the console would be far ahead (or behind), at 370 Euro.