Madrid - The financial sector risks being catapulted into a new crisis by a 2trillion euro debt time bomb in southern
Europe. The cost of borrowing charged on loans between banks rose to its highest level since last summer amid new concerns about foreign liabilities racked up by Spain, Greece and Portugal.
The three stricken eurozone countries have issued public and private debt worth 2.16 trillion euros - or 22% of the region's gross domestic product - to foreign banks, pension funds and
insurers.
ABCD
Spain has emerged as a particularly acute concern, given the large size of its economy and the painful impact of the deflation of its property and construction
bubble. Some 1.49trillion euros of Spanish debt is held by overseas
institutions. The Bank of Spain on Saturday had taken over regional lender CajaSur following the failure of a planned merger, highlighting the fragility of the country's
lenders.
