The Spanish government said Monday it will introduce more austerity measures this week on top of a swath of spending cuts and tax increases approved last week, as it scrambles to contain a budget deficit that may have surpassed 8% in 2011, The Wall Street Journal reported. The new measures are set to be approved at a Cabinet meeting Thursday, Budget Minister Cristobal Montoro said Monday during an official event in Madrid. He didn't specify what measures the government plans to introduce.

Spain's central bank said Wednesday that it has agreed to hand over seized savings bank Caja de Ahorros del Mediterraneo to Banco de Sabadell SA, in a heavily assisted deal that will position the midsize Catalan bank as the country's fifth-largest lender, Dow Jones Daily Bankruptcy Review reported. Under the terms of the deal, CAM will be handed over to Sabadell along with sweeping guarantees that will cover 80% of future losses tied to the lender's huge portfolio of real-estate loans and foreclosed properties over a 10-year period.

Spain's incoming prime minister, intent on curing the country's ailing banking sector, is considering cleanup plans that could dwarf the cost of previous efforts, including the creation of a state-funded "bad bank" to acquire toxic assets or a move to force banks to dramatically boost loan-loss reserves, people close to the situation say, The Wall Street Journal reported.

Spain's central bank said yesterday that it has seized small Valencia-based lender Banco de Valencia SA, the country's latest ailing bank to require state aid, as the sector struggles to digest the fallout from the collapse of a decade-long housing boom, Dow Jones Daily Bankruptcy Review reported. The Bank of Spain said that it will inject up to EUR1 billion ($1.3 billion) in capital and will grant a credit line of up to EUR2 billion to Banco de Valencia, which was partly owned by Spain's Banco Financiero y de Ahorros SA.

Top European Central Bank officials offered a skeptical appraisal of Europe's latest plan to solve its debt crisis, suggesting that the central bank may be forced to maintain the emergency measures it has adopted to keep the problems from spreading, The Wall Street Journal reported.

The Spanish government Thursday said it will use the country's deposit-guarantee fund to cover losses resulting from its banking industry clean-up, a move aimed at protecting its efforts to slash a gaping budget deficit, The Wall Street Journal reported. Spain has three separate deposit-guarantee funds, financed by annual contributions from the country's financial institutions but administered by the Bank of Spain.

With little fanfare, Spanish taxpayers have become substantial bank proprietors since the collapse of Lehman Brothers three years ago marked the start of Europe’s financial and economic crisis. The Fund for Orderly Bank Restructuring, known as the Frob from its Spanish initials, has seized control of six groups of cajas or savings banks and is threatening to take stakes in two more if they fail to find private investors in the next month, the Financial Times reported.

Spain will announce further austerity measures Friday aimed at fending off debt market attacks while avoiding drastic cuts which may damage the ruling Socialists' chances in November's general election, Reuters reported. The government aims to save around 5 billion euros (4.3 billion pounds) with measures that include front-loading tax payments from large businesses and cutting drug costs for regional governments with a new bill on generic medicines.

France, Italy, Spain and Belgium have banned all short selling of financial stocks for 15 days in response to sharp share price falls this week, but they failed to convince other regulators to go along with a European Union-wide prohibition, the Financial Times reported. The bans on the controversial practice where investors aim to profit from price falls will take effect on Friday morning. But other main markets, including the US and the UK, have said they have no plans to follow suit.

Investor concerns over Italy and Spain are complicating efforts to deliver Greece its next chunk of rescue aid, underscoring the increasing difficulty Europe faces in reining its more than year-old credit crisis, The Wall Street Journal reported. Greece is due to receive the next installment of its original, €110 billion ($158 billion) bailout in September. But Italy and Spain, both of which committed to extend bilateral loans to Greece with other euro-zone countries, have seen their own borrowing costs rise recently.