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Spain rattles markets amid fears more regions need help Spain rattles markets amid bailout fears
(about 1 hour later)
Markets have fallen on fears Spain's indebted regional governments will push the country into seeking a full national bailout.  
On Friday, Valencia, one of the country's 17 regions, asked the central government for a financial lifeline. Markets have fallen on fears Spain's indebted regional governments will push the country into seeking a bailout.
On Sunday, a local newspaper in Murcia quoted its government's head as saying it would ask for funding help of up to 300m euros ($363m; £233m). On Friday, Valencia, one of the country's 17 regions, asked the central government for a financial lifeline, and on Sunday, the Murcia region said it was considering following suit.
The yield on Spain's 10-year bonds has jumped to 7.55%. Shares in Europe fell, with Spain's main share index down 5%. The euro hit a new two-year low against the dollar.
On Friday, the bond yield - which implies the interest rate the government would have to pay to borrow new money, and acts as a measure of investor confidence in Spain's creditworthiness - had been 7.28%. The yield on Spain's 10-year bonds reached a new euro-era high of 7.59%.
Germany's 10-year borrowing costs have fallen to 1.13%, reflecting investors' trust in the country, leaving a record difference between the yield on German and Spanish bonds. The bond yield indicates the interest rate the government would have to pay to borrow new money, and acts as a measure of investor confidence in Spain's creditworthiness. On Friday, the yield had been 7.28%.
There was more bad news for Spain on Monday when the Bank of Spain said the country's economy contracted by 0.4% in the three months to the end of June. Meanwhile bond yields in country's deemed more creditworthy have fallen. Germany's 10-year borrowing costs have fallen to 1.13%, leaving a record difference between the yield on German and Spanish bonds.
Spain has already asked for and been granted a 100bn euros bailout for its banks, so far avoiding asking for the same sort of national bailout that was needed by Greece, the Republic of Ireland and Portugal. Euro lows
Yen strength Spain has already asked for and been granted a 100bn-euros bailout for its banks, so far avoiding asking for the same sort of national bailout that was needed by Greece, the Republic of Ireland and Portugal.
Stock markets fell across Europe on Monday morning, averaging losses of 1.5%, while Spain's main Ibex share index was down more than 4%.
Spanish bank shares were down heavily again, with losses of 4%. Bankia was again the worst-hit and was down by 8%, matching Friday's loss. However, on Friday the Valencia region said it would be the first region to seek financial help from an 18bn-euro fund set up to help the country's regions.
Italy, which is also struggling with high debts, saw its main share index fall 2.5% with banks the worst hit. UniCredit and Intesa Sanpaolo were among six Italian banks suspended from trading after their share prices fell sharply. On Sunday, Murcia's government said: "Regarding the liquidity fund provided by the state, the regional government has repeatedly stated that it is studying whether to apply for it."
There is speculation that other regions are also considering seeking assistance.
There was more bad news for Spain on Monday when the Bank of Spain said the country's economy contracted by 0.4% in the three months to the end of June, having shrunk by 0.3% in the previous quarter.
European stock markets fell on Monday morning, with Spain's main Ibex share index down more than 5%.
Italy, which is also struggling with high debts, saw its main share index fall 4.4% with banks the worst hit. UniCredit and Intesa Sanpaolo were among six Italian banks suspended from trading after their share prices fell sharply.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full
On the currency markets, with euro fell to a two-year low against the US dollar, at $1.2082, while in Asian trade the euro had fallen to an 11-year low against the Japanese yen, 94.37 yen, its lowest level since November 2000.
The price of oil has also fallen by 2%, a sign that markets think there will be waning demand for oil as a result of worsening economic prospects.The price of oil has also fallen by 2%, a sign that markets think there will be waning demand for oil as a result of worsening economic prospects.
In Asian trading overnight, the euro fell to an 11-year low against the Japanese yen - which has acted as a haven currency since the 2008 financial crisis - on worries over the situation in Spain.
The euro fell to 94.37 yen, its lowest level since November 2000.
"The fear now is that, given its debt woes, Spain may eventually need a bailout from the International Monetary Fund or the eurozone's rescue fund," Justin Harper of IG Markets told the BBC."The fear now is that, given its debt woes, Spain may eventually need a bailout from the International Monetary Fund or the eurozone's rescue fund," Justin Harper of IG Markets told the BBC.
"That is driving investors away from the euro to other relatively safer-haven assets.""That is driving investors away from the euro to other relatively safer-haven assets."
Greece review
Focus is also returning to Greece's woes. On Tuesday, officials from the so-called "troika" - the International Monetary Fund, the European Commission and the European Central Bank - will arrive in Greece to assess the progress made on reforms that were agreed as part of the country's latest bailout.
Reports over the weekend suggested that the IMF would refuse calls for further aid, if, as expected, the country fails to meet targets for cutting spending and raising taxes.
There are also questions over how the country will make a 3.2bn-euro bond payment due in August.
A European Commission spokesman said on Monday that it was unlikely that the next tranche of eurozone aid for Greece would be paid before September.
"The decision on the next disbursement will only be taken once the ongoing review is completed," the spokesman said.
"Over the last few months, significant delays in programme implementation have occurred due to the double parliamentary elections in the spring.
"The Commission is confident that the decision on the next disbursement will be taken in the near future, although it is unlikely to happen before September," he said.