Asked about the fragile state of finances of some of Spain's regions, Rajoy said, "We are not going to let any region or financial entity fall because otherwise the country would fall."
Concern about the health of Europe's banks is a key constituent of the region's financial crisis. While Spanish banks suffer mainly from soured real estate investments, they and their counterparts across Europe also hold massive amounts of shaky government bonds. As the financial crisis worsens, those bonds lose value, hurting the banks.
The big fear is that if Greece eventually leaves the euro, confidence in other financially weak countries like Spain and Italy could fall, causing the value of their bonds to drop. Ultimately, the worry is that could undermine confidence in the system and create bank runs.
To avert such a disastrous scenario, financial experts are increasingly calling for a Europe-wide support system for the banks.
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