Headlines

Spain said its crisis-hit banks will need as much as €62 billion ($78.75 billion) in new capital to absorb losses from a real-estate meltdown, as the International Monetary Fund warned that the euro-zone plan to aid the country may not work, The Wall Street Journal reported. Spanish lenders have been pummeled by a dive in property prices that hasn't yet bottomed out, as loans to households are going bad amid record-high unemployment.

The European Central Bank is poised to relax its collateral rules for central-bank loans in a bid to ease strains on commercial banks in Spain and the rest of Southern Europe, according to people familiar with the matter. ECB officials have broadly agreed to make more types of securities, including certain mortgage-backed and asset-backed securities, eligible as collateral at its lending facilities. Details of the plan still need to be finalized, but a decision is expected on Friday, The Wall Street Journal reported.

Italy's prime minister, Mario Monti, has warned of the apocalyptic consequences of failure at next week's summit of EU leaders, outlining a potential death spiral whose consequences would become more political than economic. The Italian leader is to hold talks with Chancellor Angela Merkel of Germany, the French president, François Hollande, and Spain's prime minister, Mariano Rajoy, in the hope that the single currency's big four countries can pave the way for a breakthrough at next week's meeting.

Acknowledging his concern that Canada’s housing market is overheating, Finance Minister Jim Flaherty is clamping down with four changes to mortgage insurance rules, The Globe and Mail reported. At a news conference in Ottawa, Mr. Flaherty confirmed that Ottawa will reduce the maximum amortization period to 25 years from 30 years. Secondly, the maximum amount of equity homeowners can take out of their homes in a refinancing is being reduced to 80 per cent from 85 per cent.

Air France announced more than 5,000 job losses under a cost-cutting plan on Thursday, creating a political headache for new President Francois Hollande, Reuters reported. The cuts at the French flag carrier, part of the loss-making Air France-KLM Group, come as the world's airline industry grapples with limited growth prospects, rising costs and fallout from the euro zone debt crisis. But Hollande's Socialist government, in place since last month, has pledged to counter rising unemployment by making it prohibitively expensive for companies to lay off workers.

China’s manufacturing sector has slowed further in June and a decline in new orders shows that the weakness is likely to drag on, according to a survey released on Thursday, the Financial Times reported. HSBC said its Chinese purchasing managers’ index was on track to fall to 48.1 in June from 48.4 in May, which would mark a seven-month low. In dipping further below the 50 threshold, the flash figure, which is the earliest piece of monthly economic data for China, indicates a steepening contraction of factory activity.

An Italian proposal to use Europe's money to reduce the borrowing costs of Italy, Spain and other countries under siege by investors has become the new hot topic on the euro zone's agenda, the International Herald Tribune reported. Prime Minister Mario Monti of Italy has started urging that the euro zone's bailout funds, along with money from the European Central Bank, be used to buy Spanish and Italian bonds, whose yields have been high lately. Those yields, or interest rates, slipped Wednesday, on hopes that Europe might intervene.

Lenders to Hotel Leela, a 5-star chain that is more than two months behind in payments on $700 million of debt, are likely to bite the bullet and amend the loan terms rather than declare it in default, say bankers involved in the talks, Reuters reported. Restructuring corporate loans - allowing banks to dilute payment terms without classifying loans as bad - is on the rise in Asia's third-largest economy, providing a lifeline to borrowers struggling in a sharp economic slowdown, but piling more stress on bank balance sheets.

Greek elections may have assuaged fears of a European financial contagion spreading to Asia, at least for the moment. But as troubles brew in Spain, where borrowing costs shot up again Tuesday, and as Greece faces more painful cuts to meet bailout targets by September, many wonder who in Asia is most exposed should Europe's economy and financial system finally crack, The Wall Street Journal reported.

Catalyst Paper has announced that it is getting another chance to settle with creditors, Canada.com reported on a story from The Citizen. The company, whose holdings include the Crofton mill, has received approval from the court for additional meetings of its secured and unsecured creditors to consider a further amended plan of arrangement under the Companies' Creditors Arrangement Act. These meetings are scheduled for June 25.