Shares hit by worries over Spain

Stock markets have fallen in the US and Europe, led by bank shares, as worries over Spain re-emerged.

The FTSE 100 dropped 1%, while Spain's Ibex fell 3.6% and the Dow Jones in New York closed down 1%.

Markets have been spooked by the rising dependence of Spain's banks, and its entire economy, on emergency ECB loans.

In bond markets, the Spanish government's 10-year cost of borrowing rose back towards 6% - a sign of fear over the country's creditworthiness.

In contrast, the cost of borrowing faced by Germany - considered the safest borrower in the eurozone - fell to 1.72%.

The cost of insuring losses on Spanish debt for five years, via financial contracts called credit default swaps, rose to a record high of 4.98% per annum.

Markets are concerned at the scale of rescue loans being provided by the European Central Bank to the banks of Spain and the rest of southern Europe.

Earlier on Friday, the Spanish central bank - which is subordinate to the European Central Bank (ECB) within the eurozone's monetary system - said <link> <caption>its net lending to its banks in March</caption> <url href="http://www.bde.es/webbde/es/estadis/infoest/e0801e.pdf" platform="highweb"/> </link> had risen to 228bn euros ($298bn; £188bn), up from 152bn euros a month earlier.

The big jump was mainly due to a second auction of three-year emergency loans carried out by the ECB, and offered to the eurozone's banks via their respective national central banks.

The increasing scale of the loans being provided by the ECB reflects the steady withdrawal by private sector investors of their own money from southern Europe to the perceived safety of Germany.