Europe Debt, Spain Debt | featured news

Spain could decide this month to ask for a bailout for its troubled banking sector, a step that would make it the fourth country in the 17-member eurozone to seek help since the EU debt crisis broke out....

Stocks fell Friday, as investors erred on the side of caution ahead of a weekend expected to bring new developments in dealing with Spain's banking crisis.

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.

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.

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.

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.

Just when we thought the euro crisis had subsided for a bit, Spain is bursting back up as a trouble spot. On Wednesday, Prime Minister Mariano Rajoy said the country is “facing an economic situation of extreme difficulty.” Spain is struggling to borrow money and can’t hit its deficit targets.

The demonstrations have overshadowed regional and municipal elections that were expected to result in a defeat for the governing Socialist Party.

Fueling the demonstrators’ anger is the perceived failure by politicians to alleviate the hardships imposed on a struggling population by a jobless rate of 21 percent.

Portugal was put on notice on Tuesday that its credit rating could be cut and fellow euro zone debtor Spain had to pay more to issue new debt, suggesting the currency bloc's crisis will rage unabated in 2011.