Headlines

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut, Reuters reported. Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout.

The European Union pressed Spain on Thursday to urgently clear up doubts over its mammoth rescue of stricken lender Bankia so as to calm investors fearing a financial breakdown, Agence France-Presse reported. As investors exited Spanish government bonds and stocks, the bloc called on Madrid to provide details of its bailout of Bankia. Bankia is asking the state for 19 billion euros ($24 billion) to repair its books, in addition to 4.5 billion euros already injected, the biggest rescue in Spanish banking history.

Mario Draghi, ECB president, has criticised the Spanish government for underestimating the scale of Bankia’s troubles and called for the supervision of Europe’s most important banks to be taken out of the hands of national regulators, the Financial Times reported. Mr Draghi told the European Parliament on Thursday that, when confronted with a “dramatic need” to rescue banks such as Bankia and Dexia, a Belgian lender, national supervisors repeatedly underestimated the amount a rescue would cost. “There is a first assessment, then a second, a third, a fourth,” Mr Draghi said.

Investors holding notes with a nominal value of USD1.75bn against the UK subsidiary of Petroplus look increasingly unlikely to recover more than a small part of their principal after the administrator of the UK oil refinery business said it had not been able to sell the site after four months of trying, International Financing Review reported. "We have worked tirelessly to explore all feasible options for the refinery. We have had contact with over 100 possible investors and purchasers.

Today, Greece is convulsing ahead of its most critical election in at least a generation. One of the flash points is the new property tax—a window into what has gone wrong with Greece, and with Europe's plan to rescue it, The Wall Street Journal reported. For many in the euro zone, Greece's sluggish tax receipts are a perennial frustration. For many in Greece, however, the new taxes—which fall particularly hard on those lower on the income scale—are only compounding the country's woes and stifling its economy.

Amid Europe's intensifying debt crisis, a spat between banking authorities in Germany and Italy shows how Europe's carefully nourished financial ties are fraying, The Wall Street Journal reported. The row kicked up last fall when German banking regulators ordered Italian bank UniCredit SpA to stop borrowing billions of euros from its German subsidiary. They wanted to protect their banking system from being infected by the weaker one to the south. The move angered Italy's central bankers and sent relations between financial authorities into a nose dive.

The European Commission challenged Germany’s remedies for the financial crisis, calling for direct euro-area aid for troubled banks and demanding a path to common bond issuance, Bloomberg reported. The commission, the European Union’s central regulator, sided with Spain in proposing that the planned permanent rescue fund, the European Stability Mechanism, inject cash to banks instead of channeling the money via national governments. “Flexibility and speed of action will be of the essence,” Jose Barroso, the commission’s president, said in Brussels yesterday.

The European Commission threw Spain, the latest frontline in Europe's debt war, two potential lifelines on Wednesday, offering more time to reduce its budget deficit and direct aid from a euro zone rescue fund to recapitalise distressed banks, Reuters reported. Spanish government borrowing costs lurched higher and the Madrid stock market hit a nine-year low with investors rattled by the parlous state of its banking sector fleeing to the relative haven of German bonds.

Continued concerns about Spanish banks sent the country's stock market to fresh nine-year lows, the two-year German yield to zero and the euro to its weakest level against the dollar in nearly two years, The Wall Street Journal reported. Investors scrambled for safe havens, dumping stocks as well as debt from Italy and Spain, two financially stressed nations that also are among the biggest in the 17-nation euro zone.

Irish banks will need up to €4 billion more over the next six years to meet international rules on the levels of capital they must hold, the deputy governor of the Central Bank Matthew Elderfield has said, the Irish Times reported. In an interview with German newspaper Boersen-Zeitung, Mr Elderfield said the banks would require a further €3 billion-€4 billion to meet the international capital rules but he hoped the banks would be able to raise this funding themselves from profits.