EU authorities are working behind the scenes to pave the way for a new Spanish rescue programme and unlimited bond buying by the European Central Bank, by helping Madrid craft an economic reform programme that will be unveiled next week, the Financial Times reported. According to officials involved in the discussions, talks between the Spanish government and the European Commission are focusing on measures that would be demanded by international lenders as part of a new rescue programme, ensuring they are in place before a bailout is formally requested.

Prime Minister Mario Monti may have saved Italy from ruinous default but the growth potential of Europe's most sluggish economy is as weak as ever, and that means prospects for lasting debt reduction remain fragile, Reuters reported in an analysis. Thanks to his decisive austerity measures and personal credibility, the economist and former European commissioner has put Italy back at the centre of European decision making and helped to lower its borrowing costs.

The Irish economy was stagnant in the second quarter of the year, as consumers continued to cut back on spending and capital investment slumped, the Irish Times reported. The figures were a further blow to hopes for economic growth, coming a day after it was revealed the unemployment rate has risen to 14.8 per cent. The Central Statistic Office said preliminary estimates for the three-month period showed gross domestic product was €39.7 billion, unchanged from the previous quarter.

The European Central Bank has urged the Irish government to narrow the category of debtors who will be eligible for its new insolvency regime, warning that current proposals could impact on the capital adequacy of the country's lenders, Reuters reported. In response to growing arrears among homeowners and outdated bankruptcy laws, Ireland has proposed new non-judicial routes for struggling mortgage holders to settle both unsecured and secured debts of up to 3 million euros ($3.9 million). The new laws are currently in the draft stage.

New figures show no slowdown in job losses. The number of people at work in the April-June period fell by nearly 14,000, the biggest three-month fall in a year, according to the Central Statistics Office, the Irish Times reported. The figures appear to dash hopes that employment growth is at hand. They show there were 1,783,400 people employed on a seasonally adjusted basis in the second quarter, meaning there are 357,000 fewer people at work since employment peaked in 2007.

BTA Bank, the Kazakh lender seeking to overhaul its debt for a second time, said a Ukrainian court recognized the restructuring proceedings and extended protection over its assets, Bloomberg reported. “This recognition is a part of the bank’s current restructuring process and the order follows successful applications for recognition made by the BTA in the U.K. and U.S., which were obtained on July 11 and Aug. 16, respectively,” the Almaty-based lender said in a statement e- mailed today.

CSA Czech Airlines won European Union authorization to receive government restructuring aid after it sold assets, reduced capacity and gave up landing slots at European airports, Bloomberg Businessweek reported. The European Commission said it approved a 2.5 billion- koruna ($130 million) loan to the airline from state-owned company Osinek SA after Czech airlines agreed to a five-year restructuring plan that will also see it sell subsidiaries, aircraft and other assets and secure a private bank loan for an aircraft lease.

Allied Irish Bank was duped into lending nearly £800 million to two British alleged fraudsters to buy 16 commercial properties in Britain at the height of the property boom on the back of forged documentation, a London court was told yesterday, the Irish Times. Achilleas Kallakis and his co- defendant Alexander Williams face 23 charges of fraud in the retrial, which began in Southwark Crown Court in London yesterday and could last for several months.

A Polish court on Tuesday delayed until Oct. 2 a ruling on whether to allow an 11.6-billion zloty ($3.7 billion) investment in new power units by Poland's top utility PGE, a decision keenly awaited by troubled local builders, Reuters reported. The utility has said that more delays in starting the project, the largest in the country's power sector, could hurt Polish construction firms, which are in financial difficulties, and deprive the slowing economy of an important cash stimulus.

An accelerating flight of deposits from banks in four European countries is jeopardizing the renewal of economic growth and undermining a main tenet of the common currency: an integrated financial system, Bloomberg reported. A total of 326 billion euros ($425 billion) was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg. The plight of Irish and Greek lenders, which were bleeding cash in 2010, spread to Spain and Portugal last year.