Europe’s grand plan to strengthen its banking system is set to fall well short of market expectations, identifying a capital shortfall of less than €100bn that must be made up over the next six to nine months, according to the latest official estimates, the Financial Times reported. The European Union’s estimate of the necessary recapitalisation effort compares with a recent Inernational Monetary Fund report that identified a €200bn hole in banks’ balance sheets stemming from sovereign debt writedowns.

Irish fashion retailer A|wear has been sold to a UK group called Hilco, which specialises in distressed restructurings, the Irish Times reported. No financial details were released yesterday although Hilco said it would provide A|wear with “extended working capital facilities to facilitate the business’s financial needs”. A|wear was sold by Brown Thomas in 2007 for a reported €70 million to a consortium comprising UK private equity group Alchemy Partners and management, who took a 20 per cent stake in the business. The deal was backed with debt provided by Ulster Bank.

Disagreement between France and Germany may prevent eurozone leaders from reaching a crucial deal on a second rescue package for Greece this weekend, a person familiar with the negotiations said Tuesday, The Washington Post reported on an Associated Press story. A common position of the two biggest eurozone economies is seen as a precondition for reaching agreement between all 17 countries in the currency union at a crisis summit on Sunday.

Some euro zone countries want a European Commission task force to be given extra powers to oversee the sale of Greek state assets and the country's civil service under a far-reaching plan to tighten supervision of Athens, EU sources told Reuters. The radical proposal, dismissed by some officials as a form of colonialism and which may be shot down in the face of such criticism, underscores mounting pressure for stricter policing of Athens, with some ready to demand its sovereignty be clipped. The European Commission said no such plan was in the works.

The euro zone's debt crisis will slam the economies of Central and Eastern Europe next year because of their close trade and financial links, said a development bank, The Wall Street Journal reported. In a report on the economic prospects for the 29 countries in which it invests, the European Bank for Reconstruction and Development also said Tuesday that growth among countries in southeastern Europe with close ties to Greece will be slower than previously expected as a result of that country's debt problems and the effect on its banks.

Germany, Japan and China must take greater responsibility for getting the world economy out of the doldrums by boosting demand for imports to help highly indebted countries get back on track, Bank of England Governor Mervyn King said on Tuesday, Reuters reported. The lack of rebalancing between deficit and surplus nations means countries such as Britain have had to support their economies with ultra-loose monetary policy, creating a dilemma between short-term stimulus and a long-term need to cut back spending, King said.

Portugal's government unveiled harsh new austerity measures to control its budget deficit over the next two years, as it seeks to convince European peers that it has the political will to keep the promises it made when it was bailed out and avoid Greece's fate, The Wall Street Journal reported. The new budget's tax-increase and spending-cut elements would reduce the government deficit by six percentage points of gross domestic product from what it would have been under current policies, Finance Minister Vitor Gaspar said in an interview.

Confidence among small U.K. businesses dropped sharply in the third quarter, a survey showed Monday, the latest sign of a slowdown in private-sector activity that is building pressure on the government to offer more support for companies, The Wall Street Journal reported. The Federation of Small Businesses said its quarterly confidence index fell to a reading of minus 9.3 for the period from July to September, from 0.3 in the previous three months. The index measures how small businesses see their prospects for the coming three months.

Former Anglo Irish Bank chief executive David Drumm has lost a bid to withhold $500,000 (€364,000) from his creditors in his US bankruptcy case by failing in a claim that his seaside property in Cape Cod was his main home, the Irish Times reported. A Boston court ruled yesterday that Mr Drumm was not entitled to claim a “homestead exemption” for $500,000 on his multimillion-dollar house at Stage Neck Road in Chatham, Massachusetts.

European competition authorities on Monday gave temporary approval to Belgium's nationalisation of Dexia's Belgian unit under a rescue plan of the Franco-Belgian banking group, Agence France-Presse reported. The European Commission gave the Belgian government six months to provide a new restructuring plan for Dexia Bank Belgium, saying it was too soon to determine if the 4.0-billion-euro acquisition complies with EU state aid rules. "The Commission acknowledges that the measure is necessary to preserve financial stability," the European Union's executive arm said in a statement.