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.

Spain and Italy paid a high price to sell short-term debt on Tuesday, compounding investors' concern that last week's bailout package for Greece left the euro zone's debt crisis unresolved, Reuters reported. Spain's short-term cost of borrowing hit three-year highs and demand fell at its Treasury bills auction while yields at a sale of six-month Italian paper hit their highest since November 2008.

Spanish savings bank Caja de Ahorros del Mediterraneo (CAM) secured EU regulatory approval on Monday for 5.8 billion euros ($8.3 billion) in state aid and must submit a restructuring plan within six months, Reuters reported. State-backed bank restructuring fund FROB will provide a 2.8 billion euro capital injection to CAM, one of five Spanish banks which this month failed a European Banking Authority stress test. The fund will also give CAM a 3 billion euro liquidity facility, the European Commission said.

Spanish banks' bad loans, a major source of concern to the financial markets, surged to the highest level for 16 years in May, the Bank of Spain said Monday. RTÉ News reported. Bank loans considered to carry a risk of non-recovery amounted to €117.59 billion, or almost 6.5% of total assets, in May - the highest ratio since June 1995, the central bank said in a report. That compared to a bad loan ratio of 6.36% in April.

Spain's central bank could offer asset protection schemes for bank takeovers at a later point in the restructuring of the country's ailing savings banks, the central bank's governor, Miguel Angel Fernandez Ordonez, said Friday, The Wall Street Journal reported. "Right now it doesn't make sense," Mr. Fernandez Ordonez, a member of the European Central Bank governing council, said, adding the Spanish central bank is trying to establish a market value for the ailing unlisted banks known as cajas without protection schemes for investors.

The Spanish government Tuesday said it cut its budget deficit in half in the first four months of the year and that efforts to overhaul the country's ailing finances are on track despite slippages from regional authorities, The Wall Street Journal reported. Finance ministry data showed that the central government slashed its January-April deficit by 53% on the year to €2.45 billion, equal to 0.2% of gross domestic product. But the finance ministry also said the country's 17 regions—which collectively control about one third of spending—had a deficit equal to 0.5% of GDP.

A series of youth rallies have swept across Spain's biggest cities ahead of this weekend's elections, with thousands calling for an overhaul of Spain's political system and economy, The Wall Street Journal reported. The protesters, mostly unemployed, filled public squares in Madrid, Barcelona and Valencia on Wednesday, and most left late Wednesday night, leaving only several hundred core protesters camped in city squares.

With Spain's troubled savings banks struggling to attract badly needed private investment, the Bank of Spain is edging toward a variation on the "bad bank" model that aims to reassure investors while minimizing government risk, The Wall Street Journal reported. The model—in which individual lenders create a so-called bad bank that holds toxic assets and is supported by state funds—shows how Spain is ramping up efforts to attract private money as its seeks to plug a €14.1 billion ($20.2 billion) capital hole in the financial sector.