I investigate contractions via Kac-Moody formalism. In particular, I show how the symmetry algebra of the standard two-dimensional Kepler system, which was identified by Daboul and Slodowy as an infinite-dimensional Kac-Moody loop algebra, and was denoted by H2, gets reduced by the symmetry breaking term, defined by the Hamiltonian H(β)=(1∕2m)(p12+p22)−α∕r−βr−1∕2cos((φ−γ)∕2). For this H(β) I define two symmetry loop algebras Li(β), i=1,2, by choosing the “basic generators” differently. These Li(β) can be mapped isomorphically onto subalgebras of H2, of codimension two or three, revealing the reduction of symmetry. Both factor algebras Li(β)∕Ii(E,β), relative to the corresponding energy-dependent ideals Ii(E,β), are isomorphic to so(3) and so(2,1) for E<0 and E>0, respectively, just as for the pure Kepler case. However, they yield two different nonstandard contractions as E→0, namely to the Heisenberg-Weyl algebra h3=w1 or to an Abelian Lie algebra, instead of the Euclidean algebra e(2) for the pure Kepler case. The above-noted example suggests a general procedure for defining generalized contractions, and also illustrates the “deformation contraction hysteresis,” where contraction which involves two contraction parameters can yield different contracted algebras, if the limits are carried out in different order.