German Chancellor Angela Merkel may fall short of a majority in her own coalition for a crucial reform of the euro zone rescue fund meant to stop a sovereign debt crisis spreading, in what would be a severe blow to her authority, a test vote showed, Reuters reported. Talk of proposals to leverage up the 440 billion euro bailout fund to multiply Europe's financial firepower lifted global stocks on Tuesday but made it harder for Merkel to unite her fractious centre-right coalition.

Wedged between impatient financial markets and restive voters, European political leaders struggled on Monday to formulate a bolder response to the sovereign debt crisis, including possibly expanding the firepower of the euro zone’s bailout fund, the International Herald Tribune reported. European officials said a plan was in the works that would enlarge the bailout fund’s borrowing power but not the amount that countries were contributing.

Investors and analysts who think a government bailout for the troubled French banking sector is increasingly likely are focussing on what form any aid could take, even as banks continue to deny they need state help, Reuters reported.

Irish house prices continued to fall last month, and at a faster pace than the previous month, the Irish Times reported. House prices dropped 1.6 per cent in August, compared to a 0.8 per cent fall in July. On an annual basis, house prices were 13.9 per cent lower last month than the previous August. This compares to an annual rate of decline of 12.5 per cent in July. The latest monthly figures, which were released by the CSO today, mean that residential properties are now 43 per cent lower than in 2007.

The German government is pushing a plan to restructure Greece's debt that would include up to a 50% loss to bond holders and new draconian budget measures imposed on the Greek government, local media report Sunday. According to the center-right Kathimerini newspaper, the German plan would involve a forced, non-voluntary restructuring of Greece's public debt, that would include slashing the value of that debt by between 40% and 50%, Dow Jones reported.

France has denied reports that it had drafted a plan to inject up to €15 billion into its major banks amid fears over their heavy exposure to Greek debt, the Irish Times reported. The Journal du Dimanche yesterday reported that the state offered a €10-15 billion bank recapitalisation at a meeting earlier this month with senior officials from five institutions: BNP Paribas, Société Générale, Crédit Agricole, Banque Populaire-Caisse d’Épargne and Crédit Mutuel.

European banks are fanning out across Asia, seeking to borrow money from wealthy individuals and cash-rich companies in a race to replace funding sources that are becoming harder and more expensive to tap, The Wall Street Journal reported. Rather than make loans and do deals, bankers from France, Italy and other countries are under orders to find sources of funding. While they are having some success, people with knowledge of their efforts say, they aren't raising enough to make a difference, leaving the banks still struggling to fund their assets.

Greek workers staged a 24-hour strike today, forcing the transport system to a standstill in protest against the government's intensified austerity drive to secure aid to save the country from bankruptcy, RTÉ News reported. Striking taxi drivers and bus, metro and rail workers meant commuters had to use their own cars, triggering long traffic jams and stranding tourists at hotels in Athens city centre for several hours. Unions said more strikes were planned. In his first public comments on yet more austerity moves, Greek Prime Minister George Papandreou said they were vital.

In the continuing drama over whether Greece will get the next slice of rescue funds from its official creditors, another critical financial test has been temporarily forgotten: the country's plan to exchange old government bonds for new, The Wall Street Journal Brussels Beat blog reported. As Greece's disputes with its lenders have intensified, the bond exchange has looked a better and better deal for investors. The exchange, the terms of which could be announced next month, was the price of securing German government support for the second bailout of Greece in July.

On a snowy Friday evening in late March, Andrei Borodin received a call as he flew out of Moscow on a private jet. Then president of Bank of Moscow, Russia’s fifth-biggest, he found himself under mounting pressure as VTB, the state-controlled lender that is Russia’s second biggest, tried to take over his bank, the Financial Times reported in an analysis. Just hours earlier, the government’s budget watchdog had called for his suspension while it audited what it be­lieved were “dubious” loans to entities re­lated to Bank of Moscow.