The Bank of Spain says the Spanish economy moved deeper into recession in the second quarter.
To add to Madrid’s woes it is being reported that the country’s regions are in financial difficulty, pushing it closer to a fully-fledged bailout.
Catalonia and Valencia are in the most trouble with Catalonia still debating whether to seek help from Madrid. Only last month Spain sought 100 billion euros from the EU to recapitalise its banks.
“Spain is not the only one affected, Spain at this moment is the dyke where all of the uncertainty surrounding the euro is breeching, but it goes further than Spain. It is about the future of the eurozone,” said Spain’s Economy Minister Luis De Guindos.
And there was more bad news for Madrid as Spain’s benchmark 10-year debt yields rose futher above the sustainable 7 percent that triggered the spiral in borrowing costs.
Luis de Guindos is due in Berlin to discuss the situation on Tuesday.