Spain formally requested a bailout for its banks which are still reeling from the collapse of the real estate bubble five years ago. While negotiating the terms of the rescue, Spain is also pressing for greater integration in Europe’s banking industry as it seeks to stem contagion between lenders and the state. Spain also backs the creation of a common banking regulator and rules, as well as the setting up of a joint deposit guarantee fund.

Separately, Cyprus sought financial support from the euro area’s rescue funds, thereby becoming the fifth of the euro’s 17 member states to request a bailout. In the meantime, investors are eagerly awaiting the outcome of this week’s meeting of European heads of state, hoping they would come up with a bold plan to resolve the present crisis.

Meanwhile, the UK’s May budget deficit jumped to £17.9 billion from £15.2bn a year ago, in excess of forecasts for £14.8bn. Spending rose by 7.9% and revenue declined by 1.6% as a weak economy trumped attempts at budget cuts.

The Bank of England Governor has continued to lay the groundwork for further quantitative easing, telling Parliament he is “struck” by how much things have deteriorated in the past six weeks.

Finally in the US, demand for new homes increased more than forecast in May. The rise was helped by a drop in mortgage rates which bolstered the residential real estate market while other sectors of the economy cooled.

According to the Commerce Department, purchases of new homes climbed to a 369,000 annual rate. This is the highest level since April 2010 and an increase of 7.6% on April. According to a Bloomberg News survey economists were expecting an increase of 347,000.

Another report by the National Association of Realtors shows that pending home sales rose by 5.9% in May after slumping 5.5% in April.

This article was compiled by Bank of Valletta for general information purposes only.