Even as France and Germany begin to show signs of economic recovery, weaker members of the European common-currency union remain mired in recession, The Wall Street Journal reported. The euro is at its strongest level against the dollar this year, and interest rates suggest investor fears over a debt default by a euro-zone member have eased since earlier in the year. Despite this, the euro zone's toughest times could lie ahead. To understand why, it is worth taking a look at Spain.

Spanish jobless claims resumed their upward spiral in August, ending several months of improvement in which an €8 billion ($11.37 billion) government infrastructure program and the summer tourism season gave job creation a boost, The Wall Street Journal reported. The Spanish labor ministry said Wednesday that jobless claims rose by 84,985, or 2.4%, to 3,629,080 in August from July. August jobless claims were up 43% on the year. Spain has been rapidly shedding jobs since the collapse of a labor-intensive housing boom last year.

Earlier this year, Federal Deposit Insurance Corp. Chairman Sheila C. Bair had a discreet visit from a Spanish banker, The Wall Street Journal reported. Francisco González, chairman and chief executive of Banco Bilbao Vizcaya Argentaria SA, the second-largest bank in Spain by stock-market value after Banco Santander SA, wanted to make sure the FDIC kept him in mind when selling assets the agency is getting from failed U.S. banks, according to people familiar with the meeting.

The number of businesses and individuals filing for bankruptcy in Spain reached a record 3,285 in the first half of this year, or triple the figure in the same period in 2008, The Economic Times reported. Firms and the self-employed accounted for all but 515 of the filings, the National Statistics Institute (INE) said Wednesday. By industry, 32.1 per cent of the firms declaring bankruptcy in the second quarter were mainly involved in construction or real estate sales, while 24.9 per cent were in industry and energy, and 17.3 per cent operated in the retail sector.

Cemex SAB, the largest cement maker in the Americas, takes its proposal for restructuring $14.5 billion of bank debt to Madrid today after presenting the offer to lenders in New York earlier this week, Bloomberg reported. Monterrey, Mexico-based Cemex is seeking to extend the maturity of the debt to February 2014 from the current 2009 through 2011, the company said yesterday. Cemex also said in a U.S. securities filing that it may need to issue debt, stock or equity-linked notes and that its auditors “expressed substantial doubt” about the company’s ability to stay in business.

Spain's government approved a long-awaited €9 billion ($12.66 billion) bailout fund to shore up banks weakened by a deep economic recession and get them lending again, The Wall Street Journal reported. Spanish Finance Minister Elena Salgado said the country's systemically important institutions are healthy, but some smaller banks could have "problems" as the downturn deepens.

The problems of Greece's homes market pale in comparison with those of Spain and Ireland, but the pain is seeping through the economy. About 135,000 properties, mostly residential, remain unsold in Greece, compared with well over one million in Spain and about 70,000 in Ireland. Construction accounts for 11 percent of Greece's GDP -- a significant factor taking the economy into recession after years when Greece grew by about 4 percent annually, well above its euro-zone peers. This recession will be its first since 1993.

Faced with plunging orders, merchants across recession-wracked Spain are starting to do something that many of them have never done: cut retail prices. Prices dipped everywhere, from restaurants and fashion retailers to pharmacies and supermarkets in March, The New York Times reported. The nation’s jobless rate, already a painful 15.5 percent, could soon reach 20 percent, a troubling number for a major industrialized country.

Caja Madrid may be the first Spanish bank to stop interest payments to mortgage-backed bond investors as loan defaults soar, according to Standard & Poor’s. Homeowners lagged behind on repayments on 72 billion euros of mortgages as of January, Bank of Spain data show, after the credit crisis halted a real-estate boom. “A number of deals” may have to defer interest, said Dipesh Mehta, an asset-backed debt analyst at Barclays Capital in London. “Unemployment is the biggest risk” to Spanish mortgage bonds, he said.

Spain's government plans to set up a bank restructuring fund to inject capital or liquidity into small and medium-sized savings banks facing problems, Spanish media reported on Thursday. The fund would form part of a bank intervention plan Prime Minister Jose Luis Rodriguez Zapatero announced on Wednesday. The publicly run recapitalization fund would buy preferential shares in banks or provide loan guarantees to institutions running short of liquidity, newspaper El Pais reported.