BRUSSELS (Reuters) – Euro zone officials are exploring ways to solve one of the thorniest issues they face: how to ensure distressed banking assets are dealt with at a national level while also breaking the link between indebted governments and their banks.

EU leaders agreed in June that the region’s bailout fund, the ESM, should be allowed to directly recapitalize banks once a single euro zone supervisor is in place, probably during 2013. Such recapitalizations would, the leaders said at the time, break the “vicious circle between banks and sovereigns”.

BRUSSELS (Reuters) – European Union leaders agreed on Friday a single supervisor will take responsibility for overseeing euro zone banks from next year.

Details on the precise number of banks to be monitored and the powers the supervisor — the European Central Bank — will have, however, were left for later.

BRUSSELS (Reuters) – The small Baltic state of Latvia could become the 18th member of the euro zone in 2014 if it continues on its current economic course, EU Economic and Monetary Affairs Commissioner Olli Rehn said on Thursday.

“It is possible that they could join in 2014. The review (of whether the country meets the criteria) will be done in spring next year as was done for Estonia in 2010,” Rehn told Reuters.

BRUSSELS (Reuters) – A German proposal for a “currency commissioner” with the power to reject national budgets is in line with euro zone reforms and will be part of talks to strengthen the currency bloc, the European Union’s top economics official said.

German Chancellor Angela Merkel called just before the summit on Thursday for stronger central powers to intervene when member states break budget rules, voicing support for an idea mooted by German Finance Minister Wolfgang Schaeuble.

TOKYO, Oct 13 (Reuters) – Euro zone officials are
considering new ways to reduce Greece’s huge debt because delays
in reforms by Athens and continued recession have put the target
of 120 percent debt to GDP ratio in 2020 out of reach, euro zone
officials said.

A Greek debt sustainability analysis prepared by the
International Monetary Fund, the European Central Bank and the
European Commission in March forecast Greek debt would rise to
164 percent of GDP in 2013 from around 160 percent in 2012 under
a baseline scenario, assuming the Greek economy stopped
contracting next year.

TOKYO (Reuters) – Spain could ask for financial aid from the euro zone next month and if it does the request would likely be dealt with alongside a revised loan program for Greece and a bailout for Cyprus in one big package, euro zone officials said.

The Spanish government is considering the conditions of such a rescue package and has said it would take a decision only once it has more clarity on the conditions and the scope of the aid.

TOKYO (Reuters) – Spain could be given a precautionary credit line from the euro zone’s permanent bailout fund, if it decided to seek financial aid, which it could use to buy its own bonds at primary auctions, the EU’s top economic official said in an interview.

The comments on Friday by Olli Rehn, the European Union’s Economic and Monetary Affairs Commissioner, are the first from a senior European policymaker to describe publicly what kind of program Spain could get.

TOKYO (Reuters) – Germany held firm on Friday in insisting it was too soon to say Greece deserved more time to meet its budget-cutting goals even as the head of the IMF laid out the case for leniency.

Greece, Spain and the euro zone’s slow progress toward debt reform was centre stage at International Monetary Fund meetings despite Europe’s best effort to step out of the spotlight.

TOKYO (Reuters) – The European Central Bank could start its bond-buying scheme to help Spain as soon as Madrid signs a deal with the euro zone’s ESM bailout fund, without waiting for any ESM money actually being disbursed, ECB board member Benoit Coeure said on Friday.

Coeure said the ECB stood ready to fire its “bazooka” of unlimited government bond purchases as soon as Madrid signed a memorandum of understanding with the European Stability Mechanism — the 500 billion euro permanent bailout fund.

LUXEMBOURG (Reuters) – Euro zone finance ministers and the International Monetary Fund held a “thorough and robust” debate on Greece on Monday, but failed to make significant progress in deciding how best to get the country back on track with its bailout programme.

Ministers spent more than two hours discussing an upcoming report by the European Commission, the European Central Bank and the IMF – known as the troika – on Greece’s debt-reduction programme, with divergences emerging inside the euro zone and with the IMF over how best to proceed, officials said.