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.

A reluctant Spain has been shoved once again into the front line of the battle over the future of the euro, following indications that Greece might need another bail-out to avoid defaulting on its sovereign debt, the Financial Times reported. After the rescues of Greece and Ireland last year and the imminent bail-out package for Portugal, investors say Spain’s €1,744bn ($2,478bn) gross external debt burden and its dependence on foreign financing place it technically next in line for emergency aid from the European Union and the International Monetary Fund.

Spain's first-quarter unemployment rate soared to 21.3%, with the economy losing more jobs in the three-month period than in the whole of 2010, as the country's government said talks for much-needed labor market reform may soon result in a deal, The Wall Street Journal reported. Spain's unemployment rate, the highest in the industrialized world, rose from 20.3% in the fourth quarter as the economy lost jobs across all sectors, data released Friday by the country's statistics institute INE shows.

Madrid has been forced to make an embarrassing clarification after claims that Spain had secured from China up to €9bn in investment in its troubled savings banks were denied by Beijing, the Financial Times reported. Spanish officials said an “error of communication” had led to reports that China Investment Corporation – one of the country’s sovereign wealth funds – was considering a €9bn investment after José Luis Rodríguez Zapatero, Spain’s prime minister, met Chinese leaders this week. A CIC official told Reuters that reports in the Spanish media of the investment were false.