Bear Sterns was brought down as trading partners refused to provide short term funding to the bank.With Banks losing trust and faith in Bear Sterns solvency it was only a matter of time before it went bankrupt.The Spanish Banks are facing a situation somewhat similar though less acute than Bear Sterns did .Foreign Banks are refusing to lend to the Spanish Financial sector despite European markets and the Euro recovering from their lows.The Spanish Cajas have been in the news because of their shoddy management and weak accountability.CajaSur has already been seized by the Central Bank with other Cajas being merged  together.With confidence low in the Spanish Financial Sector even well run banks like BBVA have faced a major problem in raising money from the US Commercial Paper market.

The Spanish Treasury Secretary accepted that the Spanish Banks were facing a liquidity problem while at the same time saying that Spain did not need a EU bailout like Greece.Spain is facing increasing pressure to cut high fical deficits even as it reels from the effects of a real estate bubble and 20% unemployment.Labor Unions are threatening to call a general strike even as the government pushes for a structural labor reforms.

The whole European regions continues to be embroiled in turmoil as Romania faces a no-confidence motion over cutting public sector salaries and pensions.Belgium has also seen its CDS spreads widen as recent elections saw a separatist party winning the largest number of seats.Note Belgium is also delicately poised with high levels of sovereign debt and pressure to cut fiscal deficits.

Spain sees credit squeeze but denies EU rescue bid – Yahoo

Spain said on Monday that foreign banks were refusing to lend to some of its banks in the latest twist to the euro zone debt crisis, but denied it was on the brink of seeking a Greek-style European financial rescue.

Treasury Secretary Carlos Ocana acknowledged officially for the first time a liquidity freeze on some Spanish banks in the interbank market and said the government was working to restore confidence through budget cuts and structural economic reforms.”It’s definitely a problem,” Ocana told a conference of business leaders in the northern town of Santander when asked about the reported credit squeeze. But he said Madrid was not negotiating any financial aid package.

“Spain does not need additional financing from any international institution. The rumor is false and I deny it,” he said.The fourth largest economy in the euro area, Spain needs to refinance 16.2 billion euros of bonds in July. It has been able to borrow on the markets but at a rising premium, paying an average 3.317 percent to sell three-year bonds last Thursday.Banking sources said last week the liquidity freeze was affecting savings banks and small banks but not the country’s biggest financial institutions.