Economy, Euro Zone | featured news

The Spanish economy is falling deeper into recession and depositors are pulling their money out of the banks, figures published on Tuesday showed, while the country's most economically important region, Catalonia, said it needed a major rescue from Madrid.

Finance ministry officials in Greece have calculated that the debt-stricken country's economy will recover faster and its debt be more sustainable if it is given two more years to reduce its budget deficit, a Greek newspaper reported on Saturday.

The euro zone's two largest economies avoided shrinking between April and June, but the resilience of Germany and France wasn't enough to prevent the currency bloc's economy as a whole from falling back into contraction.

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.

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 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.

Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said.

Germany may be Europe’s most powerful economy. But its prosperity is so uneven that Poles just across the border see it differently: as a place where housing is a bargain... The uneasiness here helps to explain the unwillingness voiced by German Chancellor Angela Merkel about proposals that would require her country to dip further into its treasury to help address the rest of Europe’s economic problems.

Inflation in the euro zone fell to its lowest level in more than a year in May, giving the European Central Bank more leeway to stimulate the flagging 17-nation economy as the intensifying debt crisis takes its toll on confidence.

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.