Spain's borrowing costs soared back to crisis levels on Friday after infighting among eurozone countries signalled a return to the turmoil that has rocked the global economy in recent months.
The interest rate on Spanish bonds touched 7%, leaving Madrid on the brink of asking Brussels for a formal bailout, despite having secured a €100bn rescue facility for the country's banks.
Stock markets plunged and the euro tumbled as investors withdrew funds from the currency zone in favour of safer havens. The euro fell 1% to its lowest level against the dollar since July 2010. Spain's Ibex index of leading shares was down more than 3%. The German Dax fell almost 2% to 6410 and the French CAC 1.9% lower at 3168. The FTSE dropped 30 points to 5662, while the New York Dow Jones index fell 138 points to 12,719.
A report on the jobs market in the US added to market tensions after it appeared to show the powerhouse of global growth hitting the buffers. The US added only 80,000 jobs last month, well short of the 200,000 average it managed until March and the 400,000 it needs to bring down unemployment.
Christine Lagarde, the boss of the International Monetary Fund, warned that it would lower predictions of global growth in 2012 due to a slowdown in Brazil and China alongside the faltering in the eurozone and US economies.
Without revealing what the IMF would conclude in its next report, Lagarde sounded a warning that the near-term prospects had worsened. "The global growth outlook will be somewhat less than we anticipated just three months ago," she said. "And even that lower projection will depend on the right policy actions being taken."
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