Central Bank, Europe Debt | featured news

As Cypriot politicians raced to find a new financial rescue plan ahead of a Monday deadline, tensions built in the streets of the capital. Residents withdrew what money they could from ATMs amid concern the banks could collapse.

The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone.

World stock markets rebounded Friday on anticipation that central banks will act to keep any political instability in Greece following weekend elections from destabilizing the global economy.

The European Commission will propose far-reaching powers for regulators to deal with failing banks on Wednesday, a step towards the banking union the European Central Bank has demanded to secure the euro's future.

The European Central Bank stepped up pressure on Thursday for a joint fund to guarantee bank deposits in the euro zone, saying Europe needed news tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.

The International Monetary Fund said it aims to raise up to $500 billion for new loans, and said its staff estimates that countries will need about $1 trillion in loans over the coming years.

Italian bond yields are expected to fall from recent record highs in an auction on Thursday in a sign the European Central Bank has managed to ease market pressure, at least for now, with its big injection of longer-term funds earlier this month.

A top bank lobbyist insisted Saturday that banks and the eurozone are far from reaching a deal to cut Greece's debt, despite claims by eurozone finance ministers that they will ask banks to take steeper losses on their Greek bonds.

Finance Ministers and Central Bankers from members states within the Group of 20 said Saturday they saw no imminent threat of a recession as the European debt crisis unfolds.

A decision by European central banks to support the region's financial system helped calm Asian markets, setting off a rally across the region in Friday trading....