Portugal is on track to meet the terms of its €78bn bail-out programme, but needs to step up reforms to face difficult challenges ahead, according to an assessment by international lenders, the Financial Times reported. In a joint statement on Tuesday, the European Commission, International Monetary Fund and European Central Bank said Portugal had achieved a “large fiscal correction in 2011”. But it warned that the recession-hit economy would “continue to face headwinds” as unemployment and bankruptcies increased.

The Irish government announced plans to call a referendum on the new European Union budget discipline treaty, a vote it—and the rest of the euro zone—had hoped to avoid, The Wall Street Journal reported. Irish Prime Minister Enda Kenny told Parliament that he had made the decision following advice given to his cabinet by Attorney General Maire Whelan. He said he would discuss the timing over the next few weeks. The Irish have a habit of rejecting EU referendums. They passed the Nice and Lisbon treaties only in re-run votes.

The Spanish government said Monday it missed its 2011 budget-deficit target by a wide margin, highlighting the difficulties in closing one of the euro zone's largest budget gaps as the country's economy entered a new downturn, The Wall Street Journal reported. The Spanish budget ministry said Spain's total public-sector budget deficit stood at 8.51% of gross domestic product last year, above the 8% estimate the new government of Prime Minister Mariano Rajoy gave in December. Spain had been aiming for a budget deficit equal to 6% of GDP in 2011.

Bankrupt businessman Seán Quinn appeared before the Commercial Court for the first time today urging permission to defend claims by Anglo Irish Bank that he has liability for some or all of €2.34 billion loans made to various Quinn companies, the Irish Times reported. Mr Quinn told Mr Justice Peter Kelly he was “a simple farmer’s son” who didn’t need much time to argue his entitlement to be represented in his family’s case against Anglo aimed at avoiding liability for the loans, and could be ready within a week or so.

Chancellor Angela Merkel won a parliamentary vote on Greek aid after warning German lawmakers that pushing Greece out of the euro would risk “incalculable” damage, defying a public backlash against more bailout funds, Bloomberg reported. In a vote that showed dissent in her coalition growing, 496 members of the lower house, or Bundestag, voted in favor of the 130 billion-euro ($174 billion) package in Berlin; 90 voted against and five abstained.

Eurozone bank lending has shown signs of stabilisation after an abrupt fall, supporting the view that the European Central Bank’s willingness to pump cheap money into the economy may help stave off a credit crunch, the Financial Times reported. Data on the flow of bank loans to companies, showing a fall of €1bn in January compared with a €35bn fall in December, comes before a second “long-term refinancing operation” (LTRO) being carried out by the ECB, in which eurozone banks can borrow as much money as they want for three years at cheap rates.

Leading economies told Europe it must put up extra money to fight its debt crisis if it wants more help from the rest of the world, piling pressure on Germany to drop its opposition to a bigger European bailout, Reuters reported. Euro zone countries pledged on Sunday at a Group of 20 meetings of finance leaders to reassess the strength of their bailout fund in March, which could clear the way for other G20 countries to contribute more funds to the International Monetary Fund.

The Institute of International Finance urged European policy makers to support the region’s short-term growth, which is being threatened by their efforts to decrease debt levels, Bloomberg reported. While policy makers in the 17-country euro area have made progress addressing their debt crisis, the austerity measures under way will at first depress growth that’s already “subpar,” IIF Managing Director Charles Dallara wrote in a letter to Mexican Finance Minister Jose Antonio Meade, who will chair a meeting of Group of 20 finance ministers and central bank governors this weekend.

Troubled shipping companies face the threat of seizures of their vessels as banks lose patience with an industry struggling with overcapacity and falling demand, industry players say, Reuters reported. Banks have been fairly supportive until now, providing extensions such as last week's lifeline to Danish shipping company Torm A/S which was given a deferral on $1.8 billion of debt until March 1. But lenders are under pressure to cut their exposure to risky and dollar-denominated assets such as ship and trade finance to meet tougher capital rules.

More than half of Britain’s banks expect a rise in the number of companies defaulting on their loans this year amid warnings that financial houses are going on a lending “diet” and won’t be able to drive the economic recovery, Scotsman.com reported. Businesses looking to borrow more money or refinance their loans face “much tougher” conditions being imposed by the banks, according to a report published today.