Eurozone's Debt, Eurozone | featured news

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.

Europe’s debt crisis is going from bad to worse. The borrowing rates for troubled--and even not-so-troubled--European governments once again soared Friday, heightening the danger of an all-out collapse in Europe’s common currency. It comes as political leaders across the continent are all pointing to each other as needing to act to avert a worse outcome.

Germany and France clashed on Wednesday over whether the ECB should take bolder steps to stem the euro zone debt crisis, with Chancellor Angela Merkel issuing one of her starkest warnings yet against fiddling with the central bank's strict inflation-fighting mandate.

Stocks jumped more than 2 percent at the open on Thursday after European leaders agreed to boost the region's bailout fund and struck a deal with banks and insurers to accept 50 percent losses on Greek bonds.

European leaders “have risen to the challenge,” German Chancellor Angela Merkel said. French President Nicolas Sarkozy proclaimed their July 21 summit a “historic turning point” and Luxembourg Prime Minister Jean- Claude Juncker called it the “final package, of course,” to extinguish the debt inferno. Then they went on vacation. Before they returned to work, the deal fizzled.

The country that seems to crop up more and more in the current eurozone discussions is Italy, but why should it be affected by the Greek crisis?

European Union leaders made some progress toward a strategy to fight the euro zone's sovereign debt crisis on Sunday, nearing agreement on bank recapitalization and on how to leverage their rescue fund to try to stop bond market contagion.

By insisting that it receive collateral from Greece in return for aid, Finland threatens to upend an agreement that euro zone countries made in July to expand the E.U. bailout fund.

U.S. President Barack Obama and German Chancellor Angela Merkel discussed the eurozone crisis and financial-market turbulence on Saturday and vowed action to bolster the global economy, the White House said in a statement.