Europe, Euro Zone | featured news

Euro zone states are preparing to allow the bloc's permanent bailout fund to leverage its capital in the same way as its predecessor so it can reach a capacity of more than 2 trillion euros and rescue big countries if necessary, Der Spiegel said on Sunday.

Two years after eurozone began its downward financial spiral, the European Central Bank is about to unveil a widely-anticipated plan to pump more money into the system to stem a wider collapse. But the plan, similar to the massive bond-buying undertaken by U.S. central bankers four years ago, may be too little, too late. “It’s going to take a lot more than a few rate cuts here and there to give us a lift,” said Peter Dixon, a senior economist at Commerzbank Securities. “Monetary policy is effectively running out of options.”

The Swiss economy has long appeared to be surprisingly resilient to the economic downturn across Europe, but the latest statistics released Tuesday showed that Switzerland is slowing down together with the rest of Europe. After a strong first quarter, the economy contracted in the second because of falling exports to the euro zone, the Alpine country's biggest trade partner. Compared with a year earlier, the Swiss economy still managed to expand at a 0.5% pace, but it contracted 0.1% from the first quarter.

The Spanish economy is falling deeper into recession and depositors are pulling their money out of the banks, figures published on Tuesday showed, while the country's most economically important region, Catalonia, said it needed a major rescue from Madrid.

Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.

Angela Merkel reassured Greek Prime Minister Antonis Samaras on Friday that she wanted his country to stay in the euro zone, but gave no sign of ceding to his pleas for more time to meet the tough terms of Athens' international bailout.

Finance ministry officials in Greece have calculated that the debt-stricken country's economy will recover faster and its debt be more sustainable if it is given two more years to reduce its budget deficit, a Greek newspaper reported on Saturday.

The euro zone's two largest economies avoided shrinking between April and June, but the resilience of Germany and France wasn't enough to prevent the currency bloc's economy as a whole from falling back into contraction.

At the start of another critical week for the euro, the head of the finance ministers that use the currency, Jean-Claude Juncker, reinforced expectations Monday of an initiative to lower Spain’s borrowing costs, which had hit alarming heights.

Political leaders in Greece have agreed on most of the austerity measures demanded by its creditors and are now eyeing pension and wage cuts to find the final 1.5 billion euros of savings still needed, a source close to the talks said on Sunday.