Germany's credit rating warning

Germany and the Netherlands have been put on negative ratings watch by Moody's. It is after increased fears about Spain's economy sent markets tumbling after news that the country was pushed deeper into recession and a step closer to a formal bailout

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World markets under pressure

World markets came under pressure today amid fears that Spain was on the verge of asking for a multi-billion euro bailout from the EU Credit: Julien Behal/PA Wire/Press Association Images

The FTSE 100 Index was 124 points lower at 5526 in early trading amid speculation that a raft of Spanish regions were poised to ask for government bailout funds, increasing the likelihood that the country itself will turn to the EU for help.

Wall Street's Do Jones Industrial Average was also 1% lower as the yield on 10-year Spanish bonds rose to a euro-era high of 7.5% in a sign that investor confidence in the country's ability to control its finances is increasingly waning.

Vincent Forest, economist at the Economist Intelligence Unit, said: "It is now clear that Spain has entered a self-defeating cycle of austerity and economic contraction."

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