Euro, Spain Debt | featured news

The Spanish government said Wednesday it will decide within the next few weeks whether to ask for outside financial help, noting it might opt for a precautionary line of credit instead of bailout cash.

Spain's debt level and borrowing needs are set to rise next year, piling pressure on the government to apply for international aid, as it pours funds in to cash-strapped regions and an ailing banking system, its budget showed on Saturday.

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.

Corporate storm clouds gathered over Spain again as two major European companies joined the ranks of those saying they were taking steps to reduce exposure to the recession-hit country.

At the start of another critical week for the euro, the head of the finance ministers that use the currency, Jean-Claude Juncker, reinforced expectations Monday of an initiative to lower Spain’s borrowing costs, which had hit alarming heights.

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 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.

German, US and UK yields fell to all-time lows after Spanish Economy Minister Luis de Guindos said the future of the euro is at stake, driving demand for the safest government securities.

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.