Headlines

Portugal's government on Tuesday unveiled the harshest package of spending cuts so far under its 2½-year-old bailout, calling for reductions next year in pensions and public employees' wages to reach the budget-deficit target agreed to with its international lenders, The Wall Street Journal reported. While next year's budget is expected to be approved in parliament, where the center-right government has a majority, the €3.2 billion ($4.3 billion) in planned cutbacks could face resistance in the Constitutional Court, which has struck down several previous austerity measures.

Investors fear euro-zone banks will have to find tens of billions of euros of new equity next year after another industry health check designed to draw a line under the financial crisis, Reuters reported. Details on the methodology for a third round of so-called stress tests in 2014 are sketchy and it is not clear what will constitute failure and how any capital shortfalls will be filled. But euro-zone banks will likely need to raise between 20 billion and 50 billion euros ($27-70 billion), according to 41 percent of 146 investors surveyed by Morgan Stanley.

The wind down of Irish Bank Resolution Corporation is currently in full swing with the process of offering corporate loans for sale now under way. Most are being sold via portfolios but about 30 or 40 loans will be transacted on their own. Retailer Arnotts, broadcaster TV3 and fuel group Topaz are among those likely to be treated in this fashion, the reported. The alternative is to have the loans transferred to the National Asset Management Agency (Nama) and no business wants that.

Eurozone finance ministers on Monday sought ways to create a common fund to restructure or bail out troubled banks, an effort to keep financial problems in one country from endangering the entire 17-nation currency zone, CTV News reported on an Associated Press story. The ministers' discussions in Luxembourg were still in early stages, not least because of resistance from Germany and other countries that have paid the bulk of Europe's rescue programs.

In a related story, European Union finance ministers are expected to give their final approval for a new banking supervisor for the euro zone Tuesday, three European officials said Monday, allowing the European Central Bank to formally start preparations for its new role as the currency union's chief banking policeman, The Wall Street Journal reported. The U.K. last week held up the final sign-off on legislation transferring the power to supervise banks in the euro zone to the ECB—further delaying one of the central elements of the bloc's response to the financial crisis.

A leading European airline group denounced Italian plans to rescue Alitalia as illegal on Monday, as shareholders were due to vote on a capital increase to keep the near-bankrupt carrier flying, Reuters reported. International Airlines Group, which owns British Airways and Spain's Iberia, urged the European Commission to intervene over the Italian government's attempts to stitch together a bailout for Alitalia.

The BNZ, Bank of Tokyo-Mitsubishi and TSB Bank are the Solid Energy lenders who will face the biggest "haircut" on monies owed by crippled state coal miner Solid Energy, Interest.co.nz reported. Bank of Tokyo-Mitsubishi is reported to be taking legal action to try to veto a debt restructuring deal. At this stage if it came to a straight vote (which requires a 'yes' from lenders holding 75% of the outstanding debt) it appears likely that it would be outvoted by other lenders.

Greece will need to pass fresh budget cuts next year to hit the targets set by its international creditors, a senior European Central Bank official said Monday, setting the stage for another clash with Athens over how much austerity the country can bear, The Wall Street Journal reported. ECB executive board member Jörg Asmussen, appointed last year from the German Finance Ministry, also said Greece's international creditors will need to do more to cover the country's financing needs, starting from mid-2014.

Creditors of insolvent German aluminium plant Voerde Aluminium voted to extend production to the end of next year while the search for a buyer continues, a spokesman for Voerde's insolvency administrator said on Monday, Reuters reported. The Voerde smelter, which makes about 10 percent - or 115,000 tonnes - of Germany's yearly aluminium output a year, declared insolvency in May 2012. The plant in the state of North Rhine-Westphalia employs about 280 staff.

Alitalia, the Italian national airline that has made a profit only a few times in its 67-year history, once again risks collapsing as the government scrambles to find investors willing to rescue its problem child, Reuters reported. Rome offered a financial lifeline to Alitalia through the state-owned post office, but the plan depends on private shareholders ploughing more money into what many investors regard as a corporate lost cause.