Europe Debt | featured news

Spain’s borrowing costs rose to record levels for a third consecutive trading day on Monday on concerns that a deepening recession and the financing problems of its regions would force the government to seek a full-fledged bailout.

The European meltdown is weighing heavily on the U.S. economy, with states that rely heavily on exports most at risk from the deepening crisis overseas. An analysis by Wells Fargo estimates that Utah and West Virginia economies face the biggest risk from the problems in the eurozone, while many Western states including Wyoming and Colorado are unlikely to see much impact.

German leaders have a message for their anxious neighbors: Perhaps the euro crisis isn’t so dire after all. A growing chorus of German policymakers say they have years to resolve the euro zone’s problems, even as Italy and Spain press for urgent action to bring down their borrowing costs, which are approaching new heights.

Ten-year bond yields rose above 7 percent and shorter-term issues also sold at higher cost, raising fears that recent European accords were not enough to stem the debt crisis.

The Spanish government's most recent reforms will slash 56.4 billion euros ($69 billion) from the public deficit in the next two and a half years, an official document showed on Saturday, leaving a gap to be filled by taxes on energy.

Italy said on Tuesday it may want to tap euro zone aid to ease its borrowing costs as finance ministers struggled to convince markets they are getting a grip on the bloc's debt crisis, which a top European Central Banker said could escalate.

Irene Fernandez lost her job with Spain's postal service five months ago, a victim of government spending cuts. Since then, she's been getting by on spending money from her mother and the $530 a month she earns grooming dogs for neighbors.

The president of the European Commission sharply criticized Britain for blaming its economic problems on the euro zone, and warned against efforts to divide European nations.

Unemployment in the 17-country euro currency bloc hit another record in May as the crippling financial crisis pushed the continent toward the brink of recession, official figures showed Monday.

News that European leaders will take action aimed at quelling the debt crisis that has been plaguing the continent for more than two years unleashed a global rally that sent U.S. markets roaring more than 2% higher. However, Wall Street still capped the second quarter in the red.