Banks are hoarding the European Central Bank’s record 489 billion-euro ($625 billion) injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region, Bloomberg reported. Almost all of the money loaned to 523 euro-area lenders last month wound up back on deposit at the Frankfurt-based central bank instead of pouring into the financial system, ECB data show. Banks will use most of the three-year loans to meet their refinancing needs for this year and next, analysts at Morgan Stanley and Royal Bank of Scotland Group Plc estimate.

Germany's economy contracted in the fourth quarter, putting it at risk of a shallow recession at a time when euro-zone countries struggling with their debts are looking to the bloc's biggest economy to give the region a lift, The Wall Street Journal reported. Germany's stagnation, after two years of strong growth, could fuel further international calls for the country to stimulate growth. Economists said Germany's nearly balanced budget and ability to borrow money at low cost gives it the scope to boost growth that few others in Europe have.

Negotiators for banks and governments are working to complete a promised debt restructuring for Greece that will slice in half what the nation owes its private bondholders, The Wall Street Journal reported. But the deal sets up other governments in the euro zone to bear any additional burden if—many analysts say when—Greece needs more help to get out of its deep fiscal rut. The concerns about additional costs have made some European capitals wary of consummating the deal, said people familiar with the talks, and are among the reasons they have dragged on for months.

Do not expect Mario Draghi, European Central Bank president, to say so after Thursday’s interest-rate setting meeting but the eurozone is being helped significantly by the currency’s weakness, the Financial Times reported. More falls would be welcomed by businesses across the 17-country region. Exchange rates are important gauges of trust in economic systems, governments, politicians – and central bankers.

German Chancellor Angela Merkel's party will push for a financial transaction tax in Europe even though opponents of the levy include her junior coalition partners, a senior lawmaker from her Christian Democrats (CDU) said on Tuesday, Reuters reported. "It will happen," Michael Meister, the conservatives' deputy leader in parliament, said a day after Merkel acknowledged resistance in her coalition to the "Tobin tax" plan being pushed aggressively by French President Nicolas Sarkozy. Merkel favours such a tax with or without support from all 27 members of the EU.

The number of failed companies is expected to rise by 3 percent globally this year, led by Europe, under the weight of an economic slowdown and tighter monetary and budgetary policy, credit insurance company Euler Hermes said in a report, Reuters reported. Failures will likely increase by 12 percent in the euro zone, including a 19 percent rise among Mediterranean countries that have been "very weakened by the crisis", Euler Hermes Chief Economist Ludovic Subran said. Euler Hermes economists expect global gross domestic product growth to slow to 2.7 percent this year from 3 percent in 2011.

Former tycoon Sean Quinn could be effectively barred from relaunching his business career after a Belfast court ruled that his bankruptcy should be dealt with in Dublin, The Press Association reported. The 65-year-old sought bankruptcy in Northern Ireland, where he could have started a fresh career after 12 months, but now faces a wait of up to 12 years in the Irish Republic. The businessman's multibillion-euro empire collapsed over the last two years on the back of massive stock market gambles on the share price of the former Anglo Irish Bank.

Portugal's central bank Tuesday sharply lowered its economic outlook for 2012, citing a worse-than-expected drop in internal demand, and warned that instability in the euro zone and the global economy could hurt exports, The Wall Street Journal reported. In its winter report, the Bank of Portugal said it now expects the economy to contract 3.1% this year. Its fall forecast called for a 2.2% contraction. The government has put the number at 3%. Portugal's woes underscore the challenge many euro-zone countries face currently.

Negotiations on a new European treaty to reinforce budget discipline in the eurozone are making rapid progress and there is “a good chance” of reaching agreement by the end of January, according to Angela Merkel, Germany’s chancellor, the Financial Times reported. Her confidence was mirrored by Nicolas Sarkozy, French president, speaking after a bilateral Franco-German summit in Berlin on Monday. He said the new treaty, including a requirement for all 17 eurozone members to agree constitutional amendments to balance their budgets, should be signed by March 1.

Germany and France on Monday pressed Greece and its bondholders to agree on a reduction of Athens's debt burden, warning that Greece's bailout loans from the euro zone and the International Monetary Fund are on hold until a deal is reached with private investors, The Wall Street Journal reported.