In the latest twist in the eurozone debt crisis, Spain saw the yield on its 10-year government bond climb to a new high of 7.6% on Tuesday, an unsustainably high cost of borrowing in the bond markets.

German Finance Minister Wolfgang Schaeuble and his Spanish counterpart Luis de Guindos issued a statement to placate investors, in which they said the yield spike did not reflect the country’s economic fundamentals.

Meanwhile, international inspectors have warned Greece is in a precarious position as it will have to refinance billions of euros of government bonds in less than a month and will require international support to do it.

The Telegraph quotes a senior source as saying: “Europe is now paralysing almost every economic initiative. “The daily analysis of the situation is filled with doom and gloom. Spain is in turmoil and Greece may run out of money by 20 August.”

Heaping further woes onto the eurozone member countries was a recent downgrade of the outlook for Germany’s credit rating. Ratings agency Moody’s changed its outlook the country’s AAA rating to negative, suggesting it could see a downgrade within the next two years.

European equity markets sold off earlier this week, with Spain and Italy’s main indices shedding as much as 5% as the worsening crisis hit sentiment.