Europe, Europe Debt | featured news

Spain's banks need at least 40 billion euros (about $46 billion) in fresh capital to preserve the country's financial stability, the International Monetary Fund said Friday in an eagerly-awaited report.

Greece's economy shrank further in the first three months of 2012, shriveling at a yearly rate of 6.5 percent against a backdrop of painful wage cuts, tax hikes and record unemployment.

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.

When Jean-Claude Trichet called last June for the creation of a European finance ministry with power over national budgets, the idea seemed fanciful, a distant dream that would take years or even decades to realize, if it ever came to be.

Calls for Europe to take drastic steps to quell its economic crisis grew earsplitting this week, but the pleas had an intended audience of one: German Chancellor Angela Merkel. Seven decades after a war sparked by Germany brought Europe to ruin, the country’s neighbors see it as their only hope. Germany alone has the deep pockets to help struggling countries escape a worsening economic crisis that threatens to tear the region apart.

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.

The European Central Bank stepped up pressure on Thursday for a joint fund to guarantee bank deposits in the euro zone, saying Europe needed news tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.