Europe Debt Crisis, Spain 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.

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.

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 euro will survive even if Spain were cut off from capital markets, European Central Bank policymaker Ewald Nowotny said, adding the currency was in solid shape despite financial problems in some member countries.

Spain's government said Friday it plans to make its official request for EU aid for its banking sector Monday, as discussions continue on ways to inject European aid funds directly into ailing Spanish banks.

Spain lurched closer to becoming the largest euro zone country yet to be shut out of credit markets when it had to pay a euro era record price to sell short-term debt on Tuesday.

European leaders faced increasing pressure on Thursday to respond to the euro crisis, as Spanish bond yields hit a level that has triggered full bailouts of other nations.

Credit ratings agency Moody's Investors Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden.

Spain’s borrowing costs soared Tuesday to levels that have sent other euro members into the arms of international lenders, calling into question the viability of a bailout deal for Spain’s banking sector even as other troubled countries were weighing whether they could make similar rescue arrangements.