Headlines

Air France-KLM will strengthen its role in Italian airline Alitalia SpA, Italian transport minister Maurizio Lupi said on Monday, Reuters reported. "I expect that Air France will strongly reaffirm that Alitalia is a strategic asset for Air France, and therefore that there will be a strengthening of Air France's role," Lupi said at the margins of an industry conference in Milan.

Monte dei Paschi di Siena has cancelled coupon payments on three hybrid loans coming due at the end of the month to meet European conditions for approving a €4.1 billion state bailout, the Irish Times reported. Italy’s third-biggest bank, brought close to collapse by the euro zone debt crisis, is set to unveil a turnaround plan this week after the EU told it to toughen up a previous set of restructuring measures. The new plan is already known to include a €2.5 billion share sale imposed by Brussels, more than twice the €1 billion cash call originally pencilled in by the bank.

As the quaterly rent day approaches - when retailers pay three months’ rent in advance – research from insolvency trade group R3 has found 31% of retailers currently have a “higher than normal risk” of entering insolvency, economia reported. By comparison, 25% of all UK businesses have the same risk of failure. Liz Bingham, president of R3, said, "High Street retailers have had a tougher time of it than other sectors in the past few years.

Angela Merkel’s third term, after her overwhelming election victory yesterday, is likely to force a decision on where to spend political capital: on Europe’s ills or Germany’s, Bloomberg reported. While Germany ranks fourth in the global competitiveness study by the World Economic Forum thanks to policies enacted by her predecessor Gerhard Schroeder, the challenges are piling up. Merkel must address the aging population, shortfalls in education and infrastructure spending and ballooning pension costs, say policy makers, economists and investors.

The Treasury will rule on whether to split Royal Bank of Scotland into a "good" and "bad" bank shortly after the Conservative Party conference, according to a report. A review commissioned by the Government is expected to reject carving the part-nationalised bank in two, the Independent on Sunday reported. Meanwhile, RBS is also close to deciding who to sell a package 315 branches to - with a consortium led by private equity fund Corsair said to be in pole position.

India's central bank governor Raghuram Rajan may raise policy rates again after shocking markets by increasing them in only his first meeting, signalling he is willing to risk prolonging what is already the lowest economic growth in years in order to quash persistent inflation, Reuters reported. Raising the repo rate by 25 basis points to 7.50 percent as India stumbles through its worst economic crisis since 1991 puts pressure on New Delhi to relieve supply-side bottlenecks in the economy, such as poor infrastructure, that keep inflation high even when demand is soft.

The slew of objections filed this week in the US bankruptcy proceedings of Irish Bank Resolutions Corporation (IBRC) has delayed by several weeks its bid to protect up to $1 billion of its assets from potential seizure by creditors, the Irish Times reported. Kieran Wallace and Eamonn Richardson of KPMG, the special liquidators of IBRC, had originally sought an emergency hearing at a Delaware court yesterday for Chapter 15 protection. This would protect its US assets from a litany of lawsuits brought against it by US creditors, until the bank’s Irish wind-down was completed.

Years of recession and financial crisis have turned almost one in ten of the UK’s 2.5 million companies into “zombies”, threatening a “surge of insolvencies” as they are left behind by the improving economy, The Scotsman reported. In new report published today, financial health monitoring group Company Watch says the number of so-called zombie businesses has soared by 108 per cent in the last five years, to 227,000.

Slovenia's banks are weak and trust in the system is limited, Finance Minister Uros Cufer told parliament on Friday, as expectations grew that the country may need financial help from abroad, Reuters reported. Slovenia's banks are crippled by at least 7.5 billion euros ($10 billion) of bad loans - more than a fifth of national output - with stress tests set to reveal in November how much help the sector will need.

European finance officials tentatively approved a change to the region's budget policies that is likely to lighten the austerity required of Spain and other countries hardest hit by the sovereign-debt crisis, The Wall Street Journal reported. The change responds to criticism that European Union rules have aggravated the bloc's downturn by requiring that governments narrow their budget deficits—even in countries with deeply depressed labor markets or shrinking economies.