Spain's Debt Crisis Deepens

Morning Business Memo

The European debt crisis keeps getting worse. This morning for the first time Spanish 10-year bond yields hit 7 percent - a sign markets are far from convinced that the weekend bank rescue solved anything. Spain's borrowing costs have hit a high not seen since it joined the euro in 1999. Last night the ratings agency Moody's downgraded Spain's sovereign debt three notches from A3 to Baa3 - just one notch above "junk status".

Italian borrowing costs moved up in auctions on Thursday, with yields on 3-year bonds rising to their highest level in six months. Yields for the 3-year bond rose to 5.30 percent from 3.91 percent at a previous auction.

What does the most powerful player in Europe have to say about all this? Chancellor Angela Merkel stuck to her guns in a speech to Germany's Parliament today. "We must all resist the temptation to finance growth again through new debt," she said, adding that world leaders should not "overestimate" Germany's ability to resolve the eurozone debt crisis. She acknowledged that Europe's problems will dominate the G20 meeting - this weekend's summit of the world's most important economies in Mexico.

OPEC's split may be good news for American motorists. West Texas crude oil is selling for $83 on futures markets, and that's too low for several big oil producing nations. They want OPEC to cut output targets at today's meeting. But the Saudis are expected to say no, and they're the world's top producer.

The huge shift in smart phone preferences has a human cost. Struggling phone maker Nokia plans to lay off 10,000 workers worldwide and close plants by the end of next year. It's the latest effort by Nokia to cut costs, streamline operations and reverse plunging sales.

Foreclosure proceedings against American homeowners rose last month - and that could lead to an increase in property seizures and short sales this summer. RealtyTrac says 12 percent more homes received default or home auction notices in May than April. The total was also higher than May of last year.

Richard Davies Business Correspondent ABC NEWS Radio