In assessing Europe's debt problems, bond investors are moving beyond Portuguese debt in their hunt for the next bearish bet. Their search is taking them right next-door, The Wall Street Journal reported. Spain's borrowing costs are rising amid worries Portugal's looming budget deficits will ripple across the Iberian peninsula. Spain's 10-year bonds yield 5.33%, up a quarter-percentage point in the past month.

Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc. chief economist Willem Buiter said. “Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

Spanish house prices tumbled at their fastest pace on record in the fourth quarter, a sign that a long-running property bust will continue to weigh on Spanish households and banks, The Wall Street Journal reported. House prices fell on average by 11.2% in the fourth quarter from the same period a year earlier, well below the 7.4% decline in the third quarter, while prices of used homes was down 13.7% in the period, the country's statistics agency INE said Thursday.

Italy's successful government bond sale Wednesday added new evidence that investors have begun to give Italy better chances of avoiding a fiscal crisis than Spain, another big euro-zone economy that has been seen at risk of needing a Greek-style bailout, The Wall Street Journal reported. Italy comfortably sold the maximum targeted €6 billion ($7.8 billion) in government bonds with maturities of three and seven years. It also did so at lower cost, with the yields on both bonds falling significantly from previous auctions of similar maturities.

European finance ministers agreed to suspend European Union funds destined for Hungary because of its failure to hit budget targets while, under pressure from other euro-zone governments, Spain agreed to deeper budget cuts than it had planned for this year, The Wall Street Journal reported. The two developments on Tuesday are signs of how the tougher policing of government budgets introduced since the onset of the sovereign-debt crisis is likely to generate tensions within the EU.

Eurozone finance ministers called on Spain to make new cuts in its 2012 budget to reduce its deficit by another 0.5 per cent of economic output, a stinging rebuke to the new government of premier Mariano Rajoy, which publicly flouted Brussels-imposed deficit targets less than two weeks ago, the Financial Times reported. Despite the new cuts, Madrid will still be allowed to breach a previously agreed deficit limit of 4.4 per cent of gross domestic product this year by nearly a full percentage point; its new target will be 5.3 per cent, according to a senior eurozone official.

In the years of economic crisis since the collapse of Lehman Brothers in 2008, Spanish leaders have always been able to boast to nervous investors that Spain’s public debt burden – however bad its annual budget deficits – is smaller than Germany’s and well below the European Union average, the Financial Times reported. Economists, business executives and even government officials, however, have started to sound the alarm about the rapid and unsustainable growth of the country’s public debt.

Spain's centre-right government moved today to head off any potential rebellion by the country's 17 autonomous regions over cost-cutting measures that are key to retaining credibility with its euro zone peers and financial markets, the Irish Times reported. Finance minister Cristobal Montoro was scheduled to meet with the financial heads from all of the regions later today to drive home the message of austerity.

The euro's tough new German-penned economic rulebook will be immediately tested by spiralling budget deficits in the Netherlands and Spain, raising the prospect of swingeing fines on the two countries, it emerged at an EU summit, The Guardian reported. As eurozone leaders finally launched a second, €130bn (£108bn) bailout of Greece, EU chiefs, with the exception of David Cameron and the Czech prime minister, prepared to sign the new rulebook – the fiscal pact – on Friday morning. The rules are the main part of an attempt to get the eurozone's soaring debt levels under control.

French presidential front-runner François Hollande said taxpayers earning over €1 million ($1.35 million) a year would be subjected to a special 75% tax bracket should he be elected, underscoring heightened interest across Europe in raising taxes on the wealthiest individuals, The Wall Street Journal reported. Speaking on French television late Monday, the Socialist candidate lamented the "considerable increase" in French corporate executives' pay, which he put at €2 million a year on average. "How can we accept that?" asked Mr. Hollande.