Investors fear euro-zone banks will have to find tens of billions of euros of new equity next year after another industry health check designed to draw a line under the financial crisis, Reuters reported. Details on the methodology for a third round of so-called stress tests in 2014 are sketchy and it is not clear what will constitute failure and how any capital shortfalls will be filled. But euro-zone banks will likely need to raise between 20 billion and 50 billion euros ($27-70 billion), according to 41 percent of 146 investors surveyed by Morgan Stanley.

The wind down of Irish Bank Resolution Corporation is currently in full swing with the process of offering corporate loans for sale now under way. Most are being sold via portfolios but about 30 or 40 loans will be transacted on their own. Retailer Arnotts, broadcaster TV3 and fuel group Topaz are among those likely to be treated in this fashion, the reported. The alternative is to have the loans transferred to the National Asset Management Agency (Nama) and no business wants that.

Italian Prime Minister Enrico Letta reshaped the country’s two-year commitment to austerity by approving a labor-tax cut and relying on 3.5 billion euros ($4.7 billion) of spending reductions to meet 2014 deficit targets, Bloomberg reported. The central government will bear 2.5 billion euros of the expense cuts and regional administrations will deliver 1 billion euros, Letta said in a press conference in Rome after his cabinet approved next year’s budget yesterday. The labor-tax cut will give an extra 1.5 billion euros to workers next year and a total of 5 billion euros through 2016, he said.

Germany has insisted that eurozone countries impose losses on all bondholders in ailing banks before taxpayers’ money can be used to clean up the financial system, a move that would make it harder to activate Europe’s common safety net for lenders, the Financial Times reported. At a meeting of EU finance ministers in Luxembourg, Wolfgang Schäuble, Germany’s finance minister, hardened his position on deploying common eurozone funds to cover any big capital shortfalls exposed in next year’s European bank stress test. Berlin is able to veto use of the funds.

Shareholders in the Alitalia airline have agreed to a 300 million-euro ($400 million) capital increase to save Italy's flagship carrier from bankruptcy, the Associated Press reported. It is still unclear which shareholders will contribute. The airline said in a statement Tuesday that the 21 Italian shareholders and Air France-KLM, the largest stakeholder, have 30 days to decide whether to exercise their options to contribute money and increase their stakes. The capital increase can already count on 75 million euros from Italy's postal service and a 100-million-euro bridge loan.

Portugal's government on Tuesday unveiled the harshest package of spending cuts so far under its 2½-year-old bailout, calling for reductions next year in pensions and public employees' wages to reach the budget-deficit target agreed to with its international lenders, The Wall Street Journal reported. While next year's budget is expected to be approved in parliament, where the center-right government has a majority, the €3.2 billion ($4.3 billion) in planned cutbacks could face resistance in the Constitutional Court, which has struck down several previous austerity measures.

Eurozone finance ministers on Monday sought ways to create a common fund to restructure or bail out troubled banks, an effort to keep financial problems in one country from endangering the entire 17-nation currency zone, CTV News reported on an Associated Press story. The ministers' discussions in Luxembourg were still in early stages, not least because of resistance from Germany and other countries that have paid the bulk of Europe's rescue programs.

In a related story, European Union finance ministers are expected to give their final approval for a new banking supervisor for the euro zone Tuesday, three European officials said Monday, allowing the European Central Bank to formally start preparations for its new role as the currency union's chief banking policeman, The Wall Street Journal reported. The U.K. last week held up the final sign-off on legislation transferring the power to supervise banks in the euro zone to the ECB—further delaying one of the central elements of the bloc's response to the financial crisis.

A leading European airline group denounced Italian plans to rescue Alitalia as illegal on Monday, as shareholders were due to vote on a capital increase to keep the near-bankrupt carrier flying, Reuters reported. International Airlines Group, which owns British Airways and Spain's Iberia, urged the European Commission to intervene over the Italian government's attempts to stitch together a bailout for Alitalia.

Greece will need to pass fresh budget cuts next year to hit the targets set by its international creditors, a senior European Central Bank official said Monday, setting the stage for another clash with Athens over how much austerity the country can bear, The Wall Street Journal reported. ECB executive board member Jörg Asmussen, appointed last year from the German Finance Ministry, also said Greece's international creditors will need to do more to cover the country's financing needs, starting from mid-2014.