Headlines

Mario Draghi's fillip for Europe's financial markets has proved to be more than a seven-day wonder. His promise last week that the European Central Bank would stand ready to buy governments bonds has driven the bears from Europe's woods for now, The Wall Street Journal Brussels Beat blog reported. Borrowing costs for Spain and particularly Italy have fallen sharply. If such interest rates for these two big economies could be sustained, the euro crisis would shrink to more manageable proportions. Bears, though, aren't timid—and quite a few possible developments could bring them back.

Even as the Spanish government of Prime Minister Mariano Rajoy finds itself on the front lines of the euro debt crisis, Catalonia has thrust itself to the fore of Mr. Rajoy’s domestic challenges. Catalonia is so heavily in debt that it recently asked for a emergency loan of €5 billion, or $6.47 billion, from Madrid. But here in this region with its own language and sense of identity, the financial crisis has also brought longstanding cultural and economic resentments to a boil, The International Herald Tribune reported.

The Irish banks would require a “huge increase” in fresh capital if they adopted “unusual rules” in dealing with mortgage arrears and wrote off problem loans, the chief executive of Permanent TSB said, the Irish Times reported. Jeremy Masding told the Oireachtas finance committee in a letter that the stress tests of the banks, which identified a €4 billion capital shortfall at Permanent TSB, assumed the banks would deal with mortgage arrears as they would normally run their banks.

The financial authorities said Thursday that they have decided to strengthen the qualification of major shareholders and executives at savings banks to the level similar to those applied to commercial banks, The Korea Times reported. The move came as part of efforts to help ensure transparency in their management after the savings bank fiasco in which more than 20 savings banks had their business operations suspended due to poor financial health in the past two years.

The administrator of Brazil's Banco Cruzeiro do Sul gave bondholders a few more hours on Thursday to agree to a debt buyback that is central to saving the lender from bankruptcy, Reuters reported. Privately owned deposit guarantee fund FGC planned to analyze bondholders' responses until 1800 local time (2100 GMT), buying more time to consider takeover bids for the lender, according to a securities filing. The prior deadline on the debt buyback expired at midnight Wednesday.

Sweeping new powers for the European Central Bank, including the authority to shut down eurozone banks by withdrawing their banking licence, were proposed on Wednesday in a move that would give the ECB the ultimate authority to oversee some 6,000 banks across Europe, the Financial Times reported. The proposal, presented by José Manuel Barroso, European Commission president, is the first step in what commission officials hope will develop into a more integrated EU financial system with pooled deposit insurance and a common EU bank resolution scheme.

Germany's highest court cautiously approved the creation of the euro zone's permanent bailout facility, but insisted that the country keep its effective veto on all of the vehicle's decisions, a ruling that removes a question mark over two crucial elements of the euro zone's plans for mastering its debt crisis, The Wall Street Journal reported. It should ensure that the European Stability Mechanism comes into force as planned, creating €500 billion ($645 billion) of new firepower to aid trouble euro-zone states.

The U.K. unemployment rate rose in July, ending a streak of seven consecutive months of unchanged or declining jobless levels that confounded economists, and adding to an outlook of economic gloom for Britain's contracting economy, The Wall Street Journal reported. The Office for National Statistics said Wednesday that in the three months to the end of July, the number of people without jobs grew by 28,000 from the same period ending in June, pushing the unemployment rate to 8.1% from 8.0% the data showed.

The prospect of Ireland securing a deal in October on banking debt relief has receded after Minister for Finance Michael Noonan said it was in Dublin’s interests not to rush agreement, the Irish Times reported. Rather than rush to meet the late October deadline set by EU economics commissioner Olli Rehn, Mr Noonan suggested Ireland could get better terms on easing its multibillion debt by waiting until Spain secured assistance for its banks.

Almost half of small businesses have been refused bank credit in the last three months, according to a Bank Watch survey by industry group Isme. This finding follows a Central Bank report which last month claimed Ireland was second only to Greece in terms of refusing loans to small businesses, a claim rejected by the Irish Banking Federation, the Irish Times reported. According to the Isme survey, 49 per cent of respondent firms said they had been turned down for credit in the last three months.