Headlines

European politicians on Thursday rejected an International Monetary Fund call for banks to raise up to 200 billion euros ($290 billion) in new capital, adding to fears that policymakers may be underestimating the severity of the debt crisis. IMF chief Christine Lagarde's call on Saturday for mandatory capitalization of European banks to prevent a world recession has reignited a debate over whether they have raised sufficient capital to withstand a severe downturn.

Portugal has announced new austerity measures designed to cut its budget deficit to almost zero in under five years, promising the biggest cuts in government spending for more than 50 years, the Financial Times reported. Vítor Gaspar, finance minister, said on Wednesday the planned reduction in public expenditure by 2015 – by 7 percentage points to 43.5 per cent of gross domestic product – was “without precedent” in recent Portuguese history.

German Chancellor Angela Merkel's cabinet approved new powers for the euro zone's bailout fund on Wednesday, but she faces an uphill battle to convince party skeptics to back efforts to contain the crisis. Concerned that Germany's parliament has little control over the European Financial Stability Facility (EFSF), some members of Merkel's center-right coalition are threatening to oppose boosting its powers when the Bundestag (lower house) votes on September 29.

Euro area inflation was unchanged in August and unemployment held steady for a second month in July as economic growth in the region slowed amid a persistent sovereign debt crisis, fresh data showed on Wednesday, the International Herald Tribune reported on a Bloomberg story. The inflation rate remained at 2.5 percent after falling to that level in July, the European Union’s statistics office in Luxembourg said. The seasonally adjusted jobless rate remained at 10 percent, a separate report showed. Eurostat revised March, May and June unemployment up to 10 percent from 9.9 percent.

Norwegian oil production equipment contractor Sevan Marine ASA Wednesday announced changes to its senior management as the company continues to struggle with its finances, reporting a $639 million net loss for the second quarter, Dow Jones Daily Bankruptcy Review reported.

Ireland’s unemployment rate nudged upwards for the third consecutive month in August, with the number of people on the seasonally adjusted Live Register increasing by 1,600 as summer jobs failed to materialise with their traditional frequency, the Irish Times reported. This pushed the standardised unemployment rate up by 0.1 per cent to 14.4 per cent last month. Overall, there were 469,713 people signing on the Live Register of jobseekers benefit and allowance claimants in August on an unadjusted basis, a rise of 2,790, or 0.6 per cent, over the year.

The receiver of Blockbuster Canada Co is seeking an order from the Ontario Superior Court to wind down the video rental company's operations and shut its 253 remaining retail stores, Reuters reported. Blockbuster Inc's Canadian unit, which used to operate nearly 400 stores in Canada, had filed for protection from a New York bankruptcy court in May, a month after its U.S. parent was acquired by Dish Network for $320 million.

Fears of a pronounced European slowdown strengthened on Tuesday after a closely-watched survey showed eurozone economic confidence tumbling at the fastest rate since late 2008, the Financial Times reported. The European Commission reported business and consumer confidence had dropped far more than expected in August, adding to evidence that growth across the 17-country bloc has stagnated, and threatening to fuel fears the region could fall into recession. It added to the pressure on the European Central Bank to keep interest rates firmly on hold.

Credit Suisse, the Swiss bank, has warned investors against buying shares in Greek banks. It was a conclusion reached after lengthy analysis of bank reserves, likely profits and relationship to the ailing Greek economy. But it hardly seemed necessary – there can be few investors queueing up to add Greek bank stock to their portfolio, The Guardian reported. That is the case for most European banks. Share prices have dived since last year and despite a few mini rallies, remain depressed. In March Credit Agricole shares topped €12; last week they were just above €6.

As policy makers from the U.S. and Europe gathered in Jackson Hole, Wyo., to discuss ways to revive a fragile global recovery, China's central bank was issuing a secret memo to further rein in lending in the world's second-largest economy, The Wall Street Journal reported.