Even as the Spanish government of Prime Minister Mariano Rajoy finds itself on the front lines of the euro debt crisis, Catalonia has thrust itself to the fore of Mr. Rajoy’s domestic challenges. Catalonia is so heavily in debt that it recently asked for a emergency loan of €5 billion, or $6.47 billion, from Madrid. But here in this region with its own language and sense of identity, the financial crisis has also brought longstanding cultural and economic resentments to a boil, The International Herald Tribune reported.

The Irish banks would require a “huge increase” in fresh capital if they adopted “unusual rules” in dealing with mortgage arrears and wrote off problem loans, the chief executive of Permanent TSB said, the Irish Times reported. Jeremy Masding told the Oireachtas finance committee in a letter that the stress tests of the banks, which identified a €4 billion capital shortfall at Permanent TSB, assumed the banks would deal with mortgage arrears as they would normally run their banks.

Sweeping new powers for the European Central Bank, including the authority to shut down eurozone banks by withdrawing their banking licence, were proposed on Wednesday in a move that would give the ECB the ultimate authority to oversee some 6,000 banks across Europe, the Financial Times reported. The proposal, presented by José Manuel Barroso, European Commission president, is the first step in what commission officials hope will develop into a more integrated EU financial system with pooled deposit insurance and a common EU bank resolution scheme.

Germany's highest court cautiously approved the creation of the euro zone's permanent bailout facility, but insisted that the country keep its effective veto on all of the vehicle's decisions, a ruling that removes a question mark over two crucial elements of the euro zone's plans for mastering its debt crisis, The Wall Street Journal reported. It should ensure that the European Stability Mechanism comes into force as planned, creating €500 billion ($645 billion) of new firepower to aid trouble euro-zone states.

The U.K. unemployment rate rose in July, ending a streak of seven consecutive months of unchanged or declining jobless levels that confounded economists, and adding to an outlook of economic gloom for Britain's contracting economy, The Wall Street Journal reported. The Office for National Statistics said Wednesday that in the three months to the end of July, the number of people without jobs grew by 28,000 from the same period ending in June, pushing the unemployment rate to 8.1% from 8.0% the data showed.

The prospect of Ireland securing a deal in October on banking debt relief has receded after Minister for Finance Michael Noonan said it was in Dublin’s interests not to rush agreement, the Irish Times reported. Rather than rush to meet the late October deadline set by EU economics commissioner Olli Rehn, Mr Noonan suggested Ireland could get better terms on easing its multibillion debt by waiting until Spain secured assistance for its banks.

Almost half of small businesses have been refused bank credit in the last three months, according to a Bank Watch survey by industry group Isme. This finding follows a Central Bank report which last month claimed Ireland was second only to Greece in terms of refusing loans to small businesses, a claim rejected by the Irish Banking Federation, the Irish Times reported. According to the Isme survey, 49 per cent of respondent firms said they had been turned down for credit in the last three months.

UniCredit has asked a court to start insolvency proceedings for loss-making Italian investment company Sopaf, judicial sources said on Wednesday, Reuters reported. Sopaf, which first failed to pay back debt last November and has net debt of around 100 million euros ($129 million), said in a statement on Wednesday it had received no official notice about the insolvency proceedings request.

Britain faces a fresh fight with Brussels over who has control over the City of London, as it confronts a key element of the plans for eurozone banking union that makes it easier for London to be overruled on contentious matters of supervision, the Financial Times reported. In a proposal that will cause alarm among eurosceptic MPs, the European Commission will on Wednesday unveil reforms that strengthen the European Banking Authority, which co-ordinates rulemaking between the EU’s national supervisors.

Latvia is undeterred by the euro zone's sovereign-debt crisis and intends to adopt the common currency in a little over a year, Prime Minister Valdis Dombrovskis said, The Wall Street Journal reported. The currency's future was thrown into question after Greece, Ireland and Portugal were forced to take international bailouts to keep their economies afloat. That sparked the crisis and the 17-nation euro zone economy is expected to contract 0.3% this year according to the European Commission.