Spain, Europe Debt | featured news

Spain's credit rating was slashed by three notches on Thursday by Fitch, which signaled it could make further cuts as the cost of restructuring the country's troubled banking system spiraled and Greece's crisis deepened.

Spain, the latest combat zone in Europe's long-running debt wars, urged the euro zone to set up a new fiscal authority to manage the bloc's finances and send a clear signal to markets that the single currency project is irreversible.

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.

The International Monetary Fund says it has not been asked by Spain for a bailout and has not begun preparing one.

Spanish 10-year borrowing costs neared the 7 percent danger level and Bankia shares hit record lows on Monday after the government, struggling to sort out its finances, proposed putting sovereign debt into the struggling lender.

Prime Minister Mariano Rajoy on Sunday defended his government's harsh austerity measures aimed at correcting Spain's grim economic forecast, one day after tens of thousands of Spaniards took to the streets in protest of his handling of the country's worst crisis in decades.

Students are protesting on Barcelona's elegant boulevards, public-sector wages are being cut for the second time in three years and resentment is growing against the central government and beneficiaries of bank bailouts.

Spain's government tried to plug a gaping hole in the country's banking system on Friday, but the fourth such attempt to tackle the fallout of a property crash fell short of expectations.

News that Spain’s economy entered another recession renewed worries about the fragility of Europe’s finances on Monday and nudged stocks lower. The Dow Jones industrial average slipped 35 points to 13,192 shortly after noon Eastern.

Spain's latest credit rating downgrade has thrown into sharp relief the need to revive a banking sector that could need another 100 billion euros to cover bad debts in order to avoid exposing another weak flank in the euro zone crisis.