A German-backed proposal to expand the size of the euro-zone bailout funds is gaining ground, officials tell us, ahead of a meeting of euro-zone finance ministers on Friday in Copenhagen that is expected to seal a deal, The Wall Street Journal Real Time Brussels reported. Under the favored option, the region’s bailout funds would rise temporarily to roughly €650 billion ($799 billion) by July.

European Central Bank action to shore up the eurozone financial system failed to prevent the region’s banks scaling back lending to the private sector again last month, but it did spur a surge in demand for government bonds, the Financial Times reported. The ECB has provided more than €1tn in three year loans to eurozone banks since Mario Draghi became its president late last year – a move which he argues averted a severe “credit crunch” across the 17-country region.

State-controlled Irish Life and Permanent was ordered by the High Court to sell Irish Life to the State for €1.3 billion, which will be used to complete the recapitalisation of Permanent TSB as directed under the EU-International Monetary Fund programme, the Irish Times reported. The court ordered the sale on an application from the Minister for Finance to finalise the €4 billion recapitalisation of Permanent TSB before the separation of the banking and life businesses.

The eurozone needs to undertake “ambitious structural reforms” to boost growth and overcome its protracted debt crisis, the OECD said in a report released on Tuesday, the Financial Times reported. The Paris-based policy adviser warned that fiscal consolidation paired with banks’ reluctance to lend could lead to further economic pain in the short term, though it forecast modest 0.2 per cent growth for the 17-country bloc in 2012.

The Irish government Tuesday said a referendum on the European Union's new fiscal treaty will be held on May 31, formally starting a campaign to persuade voters to back the compact or risk exclusion from access to future bailout funds, The Wall Street Journal reported. Ireland is in the second year of an austerity program linked to €67.5 billion ($90.17 billion) of loans from the EU and the International Monetary Fund.

The administrator of insolvent refiner Petroplus has applied to a Swiss court for a six-month extension of a debt moratorium for the Cressier refinery, Reuters reported. Switzerland's 68,000 barrel per day Cressier plant, one of just two refineries in the landlocked country, is up for sale and the deadline for offers was Monday. The court had previously given the plant a two months' grace period of protection from its creditors pending offers for its purchase. The administrator, Wenger-Plattner, said in a statement it had made the application for the extension.

Central Bank governor Patrick Honohan warned today the payments on the Anglo Irish Bank and Irish Nationwide promissory notes have become "a source of risk to financial stability" to Ireland, the Irish Times reported. Mr Honohan told the Oireachtas Joint Committee on Finance, Public Expenditure and Reform a deal on the next €3.06 billion payment on March 31st was likely to be successful. He said the Central Bank has been "working vigorously" with the European Central Bank and other parties to come up with a mechanism to reduce the annual cost of the notes ahead the next payment.

A widespread strike by services workers in Germany that has already closed kindergartens, halted buses and left trash uncollected expanded to the county's largest airports on Tuesday, disrupting air travel across the country and stranding tens of thousands of passengers, The Wall Street Journal reported. Fraport AG, the operator of the Frankfurt hub, canceled around 455 flights as members of the Ver.di union walked out ahead of wage talks due Wednesday.

Abu Dhabi has discussed a £10bn investment into Royal Bank of Scotland, as part of a complex transaction that would help pave the way for the government’s eventual exit, the Financial Times reported. The investment has been debated in the course of long-running talks between UK government officials and potential investors in both RBS and Lloyds, Britain’s two big part-nationalised banks. The discussions have taken place at regular intervals over the past three years, according to people close to the discussions.

The European Union took a big step on Monday toward building a financial firewall strong enough to prevent the spread of fiscal contagion to major economies like Spain after Germany dropped its opposition to bringing the Continent’s total bailout capacity to more than 690 billion euros, or $916 billion, the International Herald Tribune reported. Angela Merkel, the German chancellor, said on Monday at a news conference in Berlin that her government remained determined that a permanent European rescue fund should be capped at 500 billion euros.