The Spanish government proved it can still finance itself on markets, despite mounting pressure for it to seek an international bailout, The Wall Street Journal reported. The Spanish debt agency Tuesday sold €4.57 billion ($5.99 billion) of short-term debt, slightly more than planned and at a cheaper rate than at previous auctions. The result showed that Spain, one of Europe's largest fiscally frail countries, is benefitting from the European Central Bank's pledge to throw its vast financial firepower behind future European bailouts.

German Chancellor Angela Merkel reiterated her support for the European Central Bank's bond-buying program as she tried to walk a fine line between endorsing ECB President Mario Draghi without alienating the Bundesbank, Germany's influential central bank, The Wall Street Journal reported. During her traditional wide-ranging summer news conference with the Berlin press corps on Monday, Ms. Merkel backed the ECB's announcement that it could resume purchasing euro-zone government bonds but tried not to isolate Bundesbank President Jens Weidmann, a vehement critic of the bond purchases.

EU Commissioner Michel Barnier has asked experts to examine the possibility of splitting up major European banks to avoid future bailouts at taxpayers' expense, Spiegel Online reported. But even less radical intervention in the banking sector could have drastic consequences for the industry, and its powerful lobby is resisting any such change. In Europe, breaking up the banks was long seen as more of a subject for armchair economists than a real prospect.

France's enduring ability to defy economic gravity - adding new taxes on top of one of the highest fiscal burdens in Europe, preserving short working hours, job protection, early retirement and generous welfare benefits - is about to be tested, Reuters reported in an analysis. President Francois Hollande has promised to bring the deficit down to 3 percent of gross domestic product in next week's 2013 budget from a forecast 4.5 percent this year.

George Osborne has a problem. The U.K. chancellor of the exchequer has staked the government's credibility on two fiscal rules designed to address the country's high deficit and burgeoning debt, The Wall Street Journal Heard on the Street blog reported. The first has proved slippery, since it requires the elimination of the structural budget deficit over a rolling five-year period—potentially delaying it indefinitely. But the second target is harder to fudge: that net debt as a share of GDP should be falling by 2015-16. Many economists believe he is likely to miss this.

Spain's government is facing an autumn of angry street protests by a recession-weary public, even after telling its European partners that its next steps to overhaul the economy would avoid further cuts in public spending, The Wall Street Journal reported. Finance Minister Luis de Guindos laid out Spain's position during weekend talks in Cyprus with his European colleagues, as tens of thousands of singing, chanting Spaniards converged Saturday on Madrid from all over the country to demand a popular referendum on the government's crisis measures.

German Finance Minister Wolfgang Schaeuble led criticism of the euro area’s rush toward common bank oversight as France, Spain, Italy and the European Commission pressed for speedy action, Bloomberg reported. European Union finance ministers were sharply divided over proposals to introduce a single supervisor in January within the 17-nation currency zone. Schaeuble, backed by ministers from Sweden, the Netherlands and Poland, said the EU must be cautious before the European Central Bank takes on its supervisory role, with the promise of direct bank bailouts from the euro’s firewall fund.

Danish-owned National Irish Bank (NIB) will turn its attention to its head office after completing a round of cuts that will see it lay off one-quarter of its workers and shutting its retail operation, the Irish Times reported. NIB, owned by Danske Bank, said in June it intended to close its 27 branches in the Republic and seek 100 redundancies from its 442-strong workforce. Yesterday, the bank confirmed it intended to review its head office in the first quarter of next year and inform staff of its findings during the second three months of 2013.

Three international banks that backed out of $10 billion debt restructuring talks with an investment company controlled by Dubai's ruler said Thursday they are now pursuing legal action against the firm, dashing hopes of a consensual deal, The Seattle Times reported on an Associated Press story. The move by Britain's Royal Bank of Scotland, Commerzbank of Germany and South African lender Standard Bank will likely further complicate Dubai Group's efforts to move beyond its debt troubles after more than a year and a half of negotiations with creditors.

Mario Draghi's fillip for Europe's financial markets has proved to be more than a seven-day wonder. His promise last week that the European Central Bank would stand ready to buy governments bonds has driven the bears from Europe's woods for now, The Wall Street Journal Brussels Beat blog reported. Borrowing costs for Spain and particularly Italy have fallen sharply. If such interest rates for these two big economies could be sustained, the euro crisis would shrink to more manageable proportions. Bears, though, aren't timid—and quite a few possible developments could bring them back.