SPAIN SPAIN SPAIN!!

pain's borrowing costs have risen to the highest rate since the launch of the euro in 1999.

The benchmark 10-year bond yield hit 6.81%, as optimism about the weekend's Spanish bank bailout continued to evaporate.

Italy's 10-year bond yield rose to 6.28%, a rate not seen since January, as concerns about its finances rose.

The interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts.

Adding to pressure on Spain, ratings agency Fitch downgraded the creditworthiness of 18 of the country's banks.

On Monday, Fitch cuts its ratings on Spain's two biggest banks, Santander and BBVA.

Growing investor concern about the Spanish bank bailout did not, however, unnerve European stock markets, which until late afternoon had traded slightly higher for most of Tuesday.

But bank shares fluctuated during day. Barclays initially fell 3.8%, while RBS was about 2% lower. But the stocks moved back into positive terrority, before again falling about 1.5% in afternoon trading.

In Spain, shares in the biggest lenders Santander and BBVA fell 1.3% and 0.9% respectively following the Fitch downgrades, but then clawed back the losses.