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Europe's banks face new credit squeeze
Under increasing pressure, Europe's banks take center stage in continent's debt crisis
By The Associated Press

PARIS (AP) ' The rates banks charge to lend dollars to one another are at their highest since late september as the financial system faces a new credit squeeze.

A slew of bad news has hit European banks this week. Five large lenders were downgraded and a sixth, Commerzbank, has seen its stock plummet amid speculation it might need more government support.

Banks depend on loans from each other for a large part of their daily funding. When fears grow that a bank may fail, that credit market tightens.

Banks are also under pressure due to the risky government debt they hold, while their stocks are plunging and governments want them to keep more cash in rainy-day funds.

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