Spain, Europe Debt | featured news

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.

Greece looks close to bolting from the European Union with national elections this weekend. Spain’s banks were just bailed out, and Italy might be next. And, closer to home, Wall Street is still reeling about May’s crummy jobs report. So you’d think U.S. stocks would be tanking? Nope. Welcome to the bad-news rally: The Dow Jones industrial average shot up more than 160 points on Tuesday.

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.

Investors fled from Spanish government debt on Monday, an immediate rejection of the country's planned bank bailout by the constituency it most desperately needs to impress: the buyers of its own government bonds.

Europe agreed Saturday to allow Spain to tap a rescue fund of up to (EURO)100 billion ($125 billion) to bail out its troubled banks, which are struggling under the weight of soured real estate loans after a Spanish housing bubble burst. Spanish Economy Minister Luis de Guindos said the country will reveal how much money it needs within coming weeks, after audits of its financial sector are completed.

Spain could ask for a rescue of its struggling banks this weekend when European finance ministers hold an emergency conference call Saturday to discuss the country's financial problems, a move that would make it the fourth member of the 17-nation eurozone to seek outside help since the continent's debt crisis erupted two years ago.

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.

Stocks closed out its best week of the year Friday, as investors played things close to the vest before the weekend when Spain is expected to request aid for its troubled banks.

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.