European markets fall on Spanish banks' stress tests

Stock exchanges across Europe lost ground on Friday as investor confidence got rattled in anticipation of the release of the results of Spanish banking stress tests after the markets close. The French government also presented its annual budget, which saw tax increases worth 20 billion euros, raising concerns consumption and economic growth could suffer in the eurozone's second largest economy. The tests on 14 Spanish banks, aimed at helping assess the negative effects on balance sheets of the bursting of the country's real-estate bubble, were a condition of the EU's agreement to lend Spain up to 100 billion euros to shore up its struggling financial institutions. Italy's FTSE Mib index was 2.2% down on Thurday and fell to 15,095 points. The yield spread between 10-year Italian bonds and the German benchmark fell amid expectations that the ongoing debt crisis may be tempered by announced action by the region's political leaders in conjunction with the European Central Bank. The spread, a barometer of Italy's borrowing costs in the eurozone crisis, closed at under 370 points with 10-year yields at 5.1%. The Frankfurt Dax bourse fell 1% to 7,216, while the Paris Cac 40 Index plunged 2.5% to 3,354 points. Madrid's Ibex index dropped 1.7% to 7,708 points. London's FTSE-100 stock market slid 0.7% to 5,742 points.