A new report from the European Commission timidly suggests what many economists believe to be true: Sky-high unemployment in Europe’s crisis-hit countries is due mainly to the economic crisis – and not the result of a fundamental decline in the ability of these economies to employ their workforces, The Wall Street Journal Real Time Brussels blog reported. The report could add momentum to recent attempts to change the method the commission, the European Union’s executive arm, uses to calculate countries’ long-term, “natural” unemployment rate.

Blockbuster's chain of film and computer game rental shops in Britain is set to go into administration, a form of bankruptcy protection, for the second time in 10 months after its private equity owner failed to turn the business around, Reuters reported. The firm's British shops originally fell victim to increased competition from supermarkets, the shift towards people watching films over the internet and a harsh economic backdrop.

European banks’ non-performing loans have doubled in just four years to reach close to €1.2tn and are expected to keep rising, according to analysis that provides a disquieting backdrop to the region’s forthcoming assessment of lenders’ balance sheets, the Financial Times reported. A report by PwC found that non-performing loans (NPLs) rose from €514bn in 2008 to €1.187tn in 2012, with rises in the most recent year driven by deteriorating conditions in Spain, Ireland, Italy and Greece. It predicted further rises in the years ahead because of the “uncertain economic climate”.

Portugal’s government is stepping up its fight against tax evasion, investing in new technology and almost doubling the number of tax inspectors even as it tries to cut costs with state workers, Bloomberg reported. Paulo Nuncio, secretary of state for fiscal affairs, is betting on a mandatory electronic invoicing system for all businesses and expanding the ranks of tax inspectors to 3,000 by year-end from 1,700 to ensure companies, wealthy individuals and hard-to-tax enterprises such as hairdressers pay all their taxes.

As the euro zone's weakest members crawl out of their longest recession in modern history, their prospects of recovery are weighed down by a crushing mountain of debt far heavier than before four years of financial crisis, Reuters reported in an analysis. Italy, Greece, Ireland and Portugal all have public debt well in excess of annual economic output and risk a Japanese-style "lost decade" of grindingly low growth and high unemployment as they slowly repay their way out of trouble.

Minister for Finance Michael Noonan will meet International Monetary Fund (IMF) officials in Washington this evening amid uncertainty over whether the Government will seek a precautionary credit line when it leaves the bailout programme in December, the Irish Times reported. With only seven weeks to go before Ireland’s official exit from the EU-IMF bailout, there is still no consensus in the troika or among European leaders about what sort of backstop might be provided to cushion Ireland’s return to the markets.

Royal Bank of Scotland could announce this week the separation of its non-core division into a new “bad bank” following the completion of a review into the business, The Telegraph reported. The taxpayer-backed lender is expected to say it will hive off the more than £50bn of toxic assets still on its balance sheet into a new unit that will focus on running them down, as well as further cutbacks to its investment banking arm.

Standard & Poor’s Ratings Services warned Friday that it may downgrade Hungary further into non-investment grade over the next 12 months should government policies weaken investor confidence and the outlook for recovery, The Wall Street Journal Emerging Europe blog reported. Hungary’s creditworthiness remains constrained by its poor growth outlook, limited monetary policy room, and mounting public as well as private-sector debt, it said. “We also believe that institutional checks and balances have weakened in recent years,” S&P said.

The Government faces demands from the troika to accept tough fiscal policy conditions in return for an emergency credit line to guard against any loss of market confidence in the wake of the bailout, the Irish Times reported. With only seven weeks to go before Ireland’s official exit from the EU-International Monetary Fund bailout, there is no consensus in the troika or among European leaders as to whether the Coalition should seek a precautionary loan programme.

Robed in black and accustomed to the quiet of their Lisbon chambers, the 13 judges of Portugal’s constitutional court have found themselves propelled unexpectedly into the cut and thrust of high European politics, the Financial Times reported. Defenders of the inviolability of national laws for some, enemies of reform to others, the seven men and six women have become critical to the success or failure of Portugal’s €78bn bailout programme and, by implication, the resolution of the eurozone crisis.