Banks' "legacy assets" sound innocent enough but in the context of Europe's debt crisis, and particularly for Ireland and Spain, the question of how to deal with existing bad debts is a time bomb that has not been defused, Reuters reported in an analysis. In the months since the term entered the EU's lexicon, efforts have been made to parse it or play it down.

Romanian state-owned chemical producer Oltchim will enter insolvency, after the Ramnicu Valcea court approved its request today (January 30). The decision can be further appealed for seven days, Romania-Insider.com reported. The company will be assigned a judiciary administrator to establish the next steps and help it re-organize. “For the time being we are waiting for administrator to talk. The factory is functional, and there’s not a question of protests. We will sit down and talk to the judiciary administrator about what needs to be done.

The number of firms going bust in recession-hit Portugal jumped 41 percent last year, but the toll should fall in 2013 after rising for seven years, credit insurance company Cosec said on Wednesday, Reuters reported. Cosec, Portugal's largest insurer, said in its annual report 6,688 companies were unable to pay their debts and declared insolvency in 2012, nearly a third of them in the construction and real estate sector. Three-fourths of the insolvent companies were small businesses.

Seat Pagine Gialle's bonds slumped by a third in the debt markets on Tuesday after the Italian phone directory firm suspended an interest payment just five months after a drawn-out debt restructuring, Reuters reported. Seat PG said its 2011-2013 business plans were under review, as were its 2015 targets, but also said it had the resources to honour upcoming debt maturities. Like other directories firms, including France's PagesJaunes and Yell in the UK, Seat PG has been struggling to reduce debts and fight competition from Internet search giants such as Google.

PSA Peugeot Citroen was ordered by a court to pause its restructuring plans as auto workers across France went on strike to protest industrywide job cuts amid signs the decline in European car demand is accelerating, Bloomberg reported. Workers burned tires and blocked access to some Renault SA factories and protested outside a Peugeot plant in a Paris suburb that is set to close. A court in the French capital said separately that Peugeot can’t eliminate jobs until a parts supplier that it controls tells workers how they may be affected by the automaker’s reorganization.

Irish banks are still dragging their feet when it comes to dealing with mortgage arrears, the Central Bank has warned. In its first quarterly bulletin of the year, the bank said lenders were not doing enough to tackle “the long-term nature” of arrears, the Irish Times reported. While acknowledging that more debt resolution measures were being rolled out by banks, the Central Bank said the level of implementation, through either debt restructuring or loan recovery, was far from adequate.

The European Central Bank's balance sheet shrank to its lowest level in nearly a year, signaling a more restrictive monetary policy that could drive the euro's exchange rate higher and further threaten the region's economy, The Wall Street Journal reported. ECB officials have welcomed the decline as a sign of stability in financial markets. As banks become less dependent on ECB loans for funding, the central bank's balance sheet gets smaller.

Ireland's banking recovery could yet be derailed by its international creditors, Reuters reported. The European Central Bank's refusal so far to give Dublin any relief on the 30-billion euro cost of bailing out Anglo Irish Bank is a major setback for government ambitions to exit an EU-IMF bailout this year and give the euro zone its first post-crisis success story. The failure to agree a deal on Anglo Irish also overshadows the country's banks.

Largely ignored by public opinion, the European Commission has drafted a new directive on bank resolution which creates the legal basis for future bank bailouts in the EU. While paying lip service to the principle of shareholder liability and creditor burden-sharing, the current draft falls woefully short of protecting European taxpayers and might cost them hundreds of billions of euros, the Financial Times reported in a commentary. Further lobbying by banks is likely to make things only worse.

Sales of European property loans will rise by about 15 percent to 25 billion euros (21.6 billion pounds) this year as Spain and Ireland speed the sale of unwanted and bad loans, confronting the extent of the real estate crash as they clear their books, Reuters reported. Both countries suffered the worst of Europe's property collapse, with prices falling more than 50 percent in some areas from the previous peak in 2007.