Complaints about the dearth of lending by banks can be heard in small and midsized businesses up and down the country, and are raising concern not just within the Spanish government but also the European Central Bank in Frankfurt, the Financial Times reported. Spain’s economic crisis and the near-collapse of its banking sector last year have conspired to choke off the flow of bank loans – threatening to dry out the vast and versatile pool that dominates Spain’s private sector.

The finance chief of Spain's Catalonia region said that unless the European Union relaxes its austerity drive, the recession in Southern Europe may spread north, The Wall Street Journal reported. "It would be a pity if a more prudent macroeconomic policy would happen only after recession has arrived in the center of Europe. It would be better to anticipate," Andreu Mas-Colell, head of economics of Catalonia's regional government, said in an interview here last week. "EU policy makers should not underestimate the depressive effects of austerity in the south," he added.

The Spanish economy will shrink by 1.5 per cent this year and unemployment is set to rise above 27 per cent, the Bank of Spain has predicted, the Financial Times reported. The central bank’s latest annual forecast leaves little doubt that 2013 will be an even tougher year for Spaniards than last year, with housing prices also heading for yet another sharp fall. The economy will again be marked by weak domestic demand, a fragile labour market and tight financial conditions, the bank said.

Shares in Bankia tumbled by as much as half yesterday as the final steps of the largest bank rescue in Spanish history crystallises a near total loss for its shareholders less than two years after it listed on the Madrid stock exchange, the Irish Times reported. Bankia shares, which were listed in summer 2011 at €3.75 in a sale marketed to hundreds of thousands of retail investors and deposit holders, opened down more than 50 per cent at €0.12. They closed down 41.4 per cent at €0.14.

Spanish property firm Renta Corporacion said on Tuesday it would file for insolvency, the latest real estate company to struggle to make debt payments as a prolonged downturn hits business and prices, Reuters reported. Creditors for the company - with debt of 162 million euros ($210 million) - include Banco Popular, ING Real Estate Finance, Deutsche Bank, Caixabank, SAE, Banco Caixa Geral and Sareb, the holding set up by the government to handle soured property assets, the company said in a statement.

A ruling from the European Union's top court will force Spain to make it easier for mortgage holders to escape foreclosure by challenging onerous mortgage terms in court, The Wall Street Journal reported. Thursday's decision from the EU Court of Justice could open the door for thousands of Spaniards to renegotiate tough mortgages, but risks hurting Spain's efforts to fix a broken banking sector. Madrid already has asked other euro-zone countries for some €40 billion ($51.8 billion) in loans to prop up local lenders that had bet big on real estate during a decadelong economic boom.

Spanish fishing company Pescanova said on Tuesday it had found discrepancies between its accounts and its bank debt, Reuters reported. Pescanova's statement comes a day after the stock market regulator opened an investigation into the company for possible market abuse. Galicia-based Pescanova, which catches, processes and packages fish on factory ships, said in a statement to the stock exchange that its auditor, BDO Auditores, was looking into the issue.

Bondholders who snubbed an aggressive tender offer from Santander last year have been rewarded, following a more generous and investor-friendly approach for the same bonds from the Spanish bank, Reuters reported. Santander on Wednesday launched an any-and-all buyback offer for a maximum of just over USD12bn in subordinated bonds as it seeks to boost its capital ratios. "Bondholders that balked at Santander's unmodified Dutch auction liability are now being offered a more straightforward offer with a higher premium," said a banker.

The number of registered unemployed in Spain rose beyond the 5m mark for the first time, but the relatively modest month-on-month increase raised fresh hopes that the country’s economic crisis may be starting to recede, the Financial Times reported. According to labour ministry data, almost 60,000 more people registered as unemployed in February than in the previous month, an increase of 1.2 per cent.

Pescanova SA, Europe’s second- biggest fish processor, plunged 60 percent after it started the initial phase of seeking creditors’ protection and delayed results pending asset sales and a debt renegotiation, Bloomberg reported. The shares tumbled to 6.96 euros in Madrid, or 60 percent lower than its previous close at 17.40 euros on Feb. 28, a day before it was suspended from trading by stock market regulator CNMV. The one-day decline was the most since at least 1994, according to data compiled by Bloomberg.