24 July 2012 Last updated at 14:18 GMT

Spain under new pressure as borrowing costs rise

Government workers protest against austerity measures

Government workers in Spain have been protesting against austerity measures again this week

Eurozone crisis

Spain's financial situation continues to worry investors, with borrowing costs rising and the Catalonia region saying it will need government funds.

Spain had to pay almost 3.7% to borrow funds for six months, higher than a few months earlier, indicating greater fears about its finances.
Meanwhile, the yield on its benchmark 10-year bond was again at almost 7.6%, a euro-era high.
Rating agency Moody's warned Spain is more likely to need a full bailout.
This could affect the euro's strongest economies, such as Germany, it said, and on Monday the agency changed its outlook for Germany's AAA credit rating to negative, the first step towards a possible downgrade within the next two years.
Germany's Finance Minister, Wolfgang Schaeuble, is due to meet the Spanish Economy Minister, Luis de Guindos, later on Tuesday in Berlin.
In other developments:

Representatives from the troika of international lenders are arriving in Greece on Tuesday to assess its progress towards reducing its debts
Their visit coincides with news that the eurozone's private sector shrank in July.
But there was a glimmer of better news from China, where manufacturing activity slowed less quickly in July than in the previous month, a survey indicated.

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Analysis

Andrew Walker BBC World Service Economics correspondent

Higher borrowing costs can make the difference between a debt situation that is a problem and one that is ultimately unsustainable.
But the impact on the interest bill is slow, and that is why a spike in bond yields doesn't immediately wreck the Spanish government's finances. It's like turning an oil tanker.
When governments borrow they generally do it by selling bonds - which are a promise to repay - and the effective interest rate that the borrower has to pay is fixed for the lifetime of each batch of bonds.
Each time Spain goes to the market for new money, the interest rate it pays then feeds into its total borrowing costs. The general trend is upwards and that means the tanker is gradually turning towards the rocks. The eurozone has to decide whether to grab the wheel, giving a new bailout to keep those borrowing costs from rising further.

Spain has already been granted a loan package of 100bn euros ($125bn; £80bn) for use by its banks, a different form of support than that given to the bailouts of Greece, the Republic of Ireland and Portugal.

But a number of the country's 17 autonomous regions are in deep debt and are lining up to tap a new 18bn-euro public fund.
The request for help from Catalonia, the second-biggest, follows on the heels of a similar call for assistance from Valencia.
The region's finance minister told the BBC the region had "no other bank than the government of Spain".
Others are expected to join them in asking the central government for a handout at a time when it is having to pay more and more to borrow for its own financing needs.
Heavy burden In addition to Germany, the Netherlands and Luxembourg - both AAA rated economies - were also put on negative watch late on Monday, joining France and Austria who were put in the same position earlier this year.
Moody's warned that Germany and other highly-rated countries may have to increase levels of support for countries such as Spain and Italy, who have not asked for a Greek-style bailout but who are struggling with high debt levels.
It said in a statement: "Even if such an event [a Greek exit] is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required.

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"This burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form."

Moody's said there was an increased chance that Greece could leave the eurozone, which "would set off a chain of financial sector shocks".
It added that policymakers could only contain these shocks at a very high cost.
The German Finance Ministry said the country would remain strong, and said that Moody's was focusing on short-term risks.
Moody's is one of a handful of agencies that assess the creditworthiness of borrowers.
Rival agencies, including Standard & Poor's and Fitch, have Germany on the AAA top rating with a stable outlook, implying they do not currently foresee a weakening of its financial position, although all agencies regularly review their rankings.

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