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| Spain rattles markets amid bailout fears | Spain rattles markets amid bailout fears |
| (39 minutes later) | |
| Markets have fallen on fears Spain's indebted regional governments will push the country into seeking a bailout. | Markets have fallen on fears Spain's indebted regional governments will push the country into seeking a bailout. |
| 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. | 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. |
| Shares in Europe fell, with Spain's main share index down 5%. The euro hit a new two-year low against the dollar. | Shares in Europe fell, with Spain's main share index down 5%. The euro hit a new two-year low against the dollar. |
| The yield on Spain's 10-year bonds reached a new euro-era high of 7.56%. | |
| 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%. | 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%. |
| 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. | 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. |
| Euro lows | Euro lows |
| 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. | 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. |
| 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. | 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. |
| 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." | 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 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. | 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%. | 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. | 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 | 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. | 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. |
| "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 | 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. | 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. | 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. | 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. | 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. | "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. | "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. | "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. |