Central Bank, Europe Debt Crisis | 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.

The data is likely to put pressure on the European Central Bank to cut interest rates at its next meeting.

Markets and the euro rose after Mario Draghi reportedly told a conference in London that the central bank would “do whatever it takes to preserve” the currency.

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.

Germany and France clashed on Wednesday over whether the ECB should take bolder steps to stem the euro zone debt crisis, with Chancellor Angela Merkel issuing one of her starkest warnings yet against fiddling with the central bank's strict inflation-fighting mandate.