Spanish borrowing rates hit new high

Investors battered Spanish financial markets, with the country''s borrowing rates hitting euro-era highs on fears that a global economic slowdown will hurt their chances of dodging Europe''s debt crisis.

As stocks and bonds nose-dived in Madrid on Tuesday, Spanish Prime Minister Jose Luis Rodriguez Zapatero delayed his vacation by a day to monitor the increasingly bleak scenario with his finance minister, Elena Salgado.

Earlier Tuesday, the yield for the Spanish 10-year bond rose as far as 6.45 percent, the highest since the euro was created and near levels seen in Greece, Ireland and Portugal before they were forced to ask for rescue loans.

The EU''s latest debt crisis plan had helped lift spirits briefly, but markets were quickly roiled again by worries that the US economy may be sliding back toward recession.

Coupled with lingering suspicions that the EU debt crisis plan will not be enough to stamp out the crisis, the fears about the US soured market sentiment across the globe.

Although Europe''s renewed debt tensions are largely a symptom of a global rise in fears among investors, the impact they have on Spain and Italy, the eurozone''s third- and fourth-largest economies, is potentially huge. The increased yields threaten Italy''s and Spain''s ability to fund government programs, and both nations are too expensive to rescue for Europe''s bailout fund.

Spain''s main stock index sank for the second day in a row, closing down 2.2 percent after plunging 3.2 percent a day earlier, and hitting its lowest level since July 2010.

Global markets have been rocked by the possibility that the US may default on its debt by not raising its borrowing ceiling. It managed to clinch a deal just in time, but investor sentiment was shaken profoundly. At the same time, US indicators show its economy was slowing sharply.