Europe, Europe Debt Crisis | 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's high borrowing costs mean it is effectively shut out of the bond market and the European Union should help Madrid recapitalize its debt-laden banks, Treasury minister Cristobal Montoro said on Tuesday.

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.

Ireland was poised to announce a "yes" vote to a European budget discipline treaty on Friday, but the referendum result brings little respite to a euro zone tormented by doubts over Greece's future in the currency bloc and Spain's wobbly banks.

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.

Greek stock markets rebounded strongly on Monday from a 22-year low on hopes a pro-bailout party will win crucial national elections next month, which would avoid a catastrophic rift with international creditors and keep the struggling country within the euro currency union....