EU leaders have expressed alarm that the eurozone’s push towards a banking union has stalled, setting up a confrontation with a more reluctant Germany at a European summit in Brussels. The group includes the French, Spanish and British leaders as well as José Manuel Barroso, president of the European Commission, and Herman Van Rompuy, president of the European Council, who chairs the two-day summit beginning on Thursday. They are increasingly concerned that recent market calm has sucked the urgency out of the plan.

Spain has set a €90 billion limit for the size of a bad bank created to take over other financial entities’ toxic real estate assets, a necessary step to obtain European funding for the sector, the Irish Times reported. The country is preparing to receive the first funds from a €100 billion credit line for its banks agreed with Europe in June, paving the way for a fuller bailout that is likely to dominate talks at a European Union summit starting today.

Greece has come to an agreement with international lenders on most measures in a new €13.8bn package of spending cuts and tax increases, although hopes of being able to present a deal to EU leaders at Thursday’s summit were dashed by a disagreement over labour market reforms.

Euro-zone governments are counting on the European Central Bank to provide most of the firepower if Spain requests a bailout, with only a modest contribution coming from the bloc's bailout fund, senior officials said, The Wall Street Journal reported. The governments hope to earmark significantly less than €100 billion ($131 billion) from their €500 billion bailout fund if Spain requests help, the senior euro-zone officials said.

A potential Spanish request for financial aid is becoming caught up in tangled diplomacy between euro-zone capitals, despite Madrid's new willingness to push ahead, The Wall Street Journal reported. A day after a senior Spanish official told reporters that German concerns were preventing Madrid from seeking assistance, German officials insisted Spain hadn't indicated it wants aid. Italy, meanwhile, continued to urge Spain to apply for help in the hope that the step would ease market pressure on its own bonds.

Britain and other European countries have deep concerns about a banking union in the euro zone, although there are signs of a compromise to limit the powers of the European Central Bank (ECB) in countries outside the euro, a UK minister told Reuters. Britain's financial services minister Greg Clark said in an interview on Tuesday that efforts to help the 17-nation euro zone and its banks recover from economic crisis must not come at the expense of the wider European Union market, which includes countries like Britain and Sweden that do not use the euro.

A Spanish court has accepted a filing for bankruptcy from two investment firms that own 31 percent of French property company Gecina, Reuters reported. Alteco and MAG Import filed for bankruptcy on Oct. 3 after a bank refused to refinance a 1.6 billion euro ($2 billion) loan, leaving nearly a dozen lenders exposed. Alteco and MAG Import met conditions for voluntary bankruptcy, two Spanish mercantile courts said in documents released on Tuesday. French bank Natixis has the most exposure to the loan, at 266 million euros.

The Central Bank has strongly criticised banks for their slow progress in tackling the mortgage crisis, saying the extent of their efforts to fix the problems showed that “wait and see” had become the strategy of choice for lenders, the Irish Times reported. In a strongly worded speech to a conference of bankers, the Central Bank’s head of banking regulation Fiona Muldoon said that the banks were behaving like teenagers in responding to its requests to deal with the problem with mortgages.

Lisbon has unveiled an uncompromisingly tough budget for 2013 involving the biggest direct tax increases in living memory as the government struggles to keep Portugal’s €78 billion bailout programme on track, the Irish Times reported. Finance minister Vítor Gaspar said yesterday that income tax increases would include a special 4 per cent levy on earnings. The average tax rate would increase from 9.8 per cent of earnings to 13.2 per cent.

The Nobel Peace Prize awarded to the European Union arrived just as a realization was dawning that Europe’s single currency — the Union’s most ambitious project — had survived three years of incessant financial turmoil and was not going to break up, the International Herald Tribune reported. But having narrowly avoided an acrimonious divorce and the loss of some of its errant children, the euro zone risks a future as an unequal, loveless marriage with frequent rows and the prospect of separate bedrooms.