Spain, Eurozone | featured news

Stocks fell and the spread between Spanish and German bonds hit a record wide, as the prospect of fresh elections heightened concerns about the likelihood of Greece exiting the euro zone.

Spain's latest credit rating downgrade has thrown into sharp relief the need to revive a banking sector that could need another 100 billion euros to cover bad debts in order to avoid exposing another weak flank in the euro zone crisis.

Monday's euro-zone downgrade warning by Standard & Poor's Ratings Services is a muscular move by a firm that was pilloried for its supposed laxity in the financial crisis. S&P put the long-term sovereign-debt ratings of 15 euro-zone nations, including struggling Italy and Spain, on negative watch. That typically means there is at least a 50% chance of a downgrade within 90 days, but the firm said Monday that it expected to announce any rating changes "as soon as possible" following this week's European Union summit, where policy makers are expected to lay out plans to enforce stricter budget rules.

Fitch on Friday cut Spain's credit ratings by two notches, just a few minutes after downgrading Italy, saying the intensification of the euro zone debt crisis has had a negative impact in the entire region.

Euro zone leaders decided on Friday they have special measures ready before financial markets open on Monday to prevent financial turmoil in Greece spreading to other countries such as Spain and Portugal.