Euro-zone partners' woes weigh heavily on Spanish stock market

The Spanish stock market suffered its worst week of the year so far, with the contagion on Friday stemming from Italy as opposed to Portugal and Greece earlier in the week.

Italy was at the epicenter of the latest bout of turbulence in the financial markets as doubts rose about its ability to meet its deficit-reduction targets, fears that its banks would emerge badly from the results of the stress tests carried out on European banks, and rumors that Finance Minister Giulio Tremonti may resign. Meanwhile, Italian Prime Minister Silvio Berlusconi announced he would not be running in the next general elections.

Tainted with the same euro-zone peripheral label as its Mediterranean partner, Spain suffered almost as badly as Italy. The Spanish blue-chip Ibex 35 index lost the psychologically important 10,000-point market after shedding 2.67 percent on Friday. That meant the benchmark index was down 5.3 percent for the week.

The spread between the yield on the Spanish 10-year government bond and the German equivalent also headed way north and was not far short of its euro-area high at 282 points.

The Spanish banks suffered the brunt of the sell-off despite reassuring remarks from European Central executive board member José Manuel González-Páramo that they would emerge well from the stress tests.