Euro zone pressure builds as Spain struggles

Spain was back in the firing line on the markets on Monday as euro zone finance ministers prepared to follow up on measures agreed at a summit late last month to tackle the debt crisis.

Spain was back in the firing line on the markets on Monday as euro zone finance ministers prepared to follow up on measures agreed at a summit late last month to tackle the debt crisis.

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The first issue of business when ministers gather is how to help Spain’s stricken banks after the breakthrough June 28-29 EU summit that promised them direct funding once a new single EU bank regulator is set up.

The promise sparked a strong market rally immediately after as direct funding would keep the money off the government’s books and so not add to Spain’s already heavy debt burden. But as doubts emerged over how and when the deal can be implemented, sentiment has turned negative, with the new regulator not expected to be in place until next year.

Spanish benchmark 10-year borrowing costs on Monday jumped back above the 7.0% danger point, and Italy was under pressure too, sparking fresh speculation they could follow Greece, Ireland, Portugal and Cyprus in needing bailouts.