Bank of Spain urges euro crisis action, warns on debt

(Reuters) - Spain's central bank urged euro zone leaders to act decisively over new crisis-fighting measures, warning that debt market turmoil risked choking off the country's economic recovery, which slowed in the second quarter.

With yields on Spanish 10-year bonds continuing to trade close to euro era highs at well above 6 percent on Friday amid a broad market selloff prompted by global growth fears, the bank said sovereign debt market tensions were the main risk to the country's outlook.

Europe's money markets freeze as crisis escalates in Italy and Spain

The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.

The three-month euribor/OIS spread, the fear gauge of credit markets, reached the highest level in two years today, jumping 7 basis points to 40 in wild trading.

Greece’s new bail-out helps, but should have gone further

WHEN Henry Paulson, America’s then treasury secretary, readied a plan to prop up Fannie Mae and Freddie Mac, two teetering housing agencies, in the summer of 2008, he spoke of having a “bazooka” in his pocket. In their response to the sovereign-debt crisis, Europe’s policymakers have tended to favour the peashooter. Their latest salvo in defence of Greece on July 21st produced some favourable initial reports, but the bang has faded. In a strange inversion of the crisis to date, the new bail-out plan seems to have helped the weaker peripherals and hurt the stronger ones.

Debt crisis puts $ on a tailspin

LONDON, July 29 (news agencies and on-line reports): The dollar fell to a four-month low against the yen and hovered near record lows versus the Swiss franc on Friday.

The euro also came under fresh pressure as investors sought safe-haven currencies on mounting sovereign debt problems.

Eurozone inflation unexpectedly slows in July to 2.5%

Eurozone inflation unexpectedly slowed in July to 2.5%, raising questions about when the European Central Bank (ECB) might raise interest rates again.

The preliminary estimate is down from 2.7% in June, according to the European Union statistics office Eurostat.

The July reading comes as a surprise after data earlier this week suggested inflation in Germany, Europe's largest economy, edged up to 2.4%.