Hi MajorD, the IndyMac closure is very important news but it has received almost zero news coverage in the U.S. In fact, over the past week or two there were reports of customer line-ups for withdrawals at their 33 bank branches but barely a peep out of the media outlets. No doubt this was part of the PPT propaganda machine at work.

As bad as economic conditions are in the U.S., the report below indicates that Spain is spiralling down quite fast due to their imploding mega housing bubble. The only problem for Spain is that they may not have such an advanced PPT and BLS to cover up the mess. The contrasting economic conditions across Europe will put major stresses on the ECB.

All the best - VHF

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Spain pulls bond sale amid economic crisis

By Ambrose Evans-Pritchard

Spain has suspended an auction of sovereign bonds as investors take fright over the country's property crash and accelerating slide into economic crisis.

The treasury pulled an expected sale of 15-year bonds after probing the market informally, saying it would wait until credit conditions began to calm down. "We are not facing financing problems. We placed a successful three-year note on Wednesday," said a spokesman.

Government officials have been shocked by the intensity of the downturn now engulfing the country. Car sales fell 31pc in June, industrial production has fallen 5.5pc over the past year and the collapsing property sector is shedding almost 100,000 jobs a month.

Miguel Sebastian, the industry minister, said the economy had ground to a halt in the second quarter and was now in "virtual recession".

Standard & Poor's has issued an alert on the banking sector, warning that "the sharp deterioration in economic conditions" would lead to a surge in bad debts. The fears are shared by Miguel Blesa, head of the lender Caja Madrid, who says the wave of defaults are "not just coming, they're galloping". Last week's interest rate rise by the European Central Bank to 4.25pc has tightened the screw further.

Spreads between Spanish bonds and German bunds have risen from four basis points last year to 27 yesterday. While state debt is low, there are concerns that bank losses from housing and commercial real estate could have knock-on effects for the government and possibly complicate euro membership.

It is unclear how Spanish authorities could conduct a rescue operation along the lines of Bear Stearns, given that there is no clear lender of last resort in the eurozone system. Fears the Bank of Spain could find itself hamstrung in a crisis have begun to unsettle investors.

Elsewhere in Europe, growth is now slowing across the board as the strong euro takes it toll. French industrial output fell 2.6pc in May, and in Germany it was down 2.4pc. Elga Bartsch, from Morgan Stanley, said Germany's resilience "seems to be melting away" as exports stall.

Europe's Aerospace and Defence Industries Association yesterday held a meeting with ECB president Jean-Claude Trichet to express "deep concern" over the euro exchange rate, now widely believed to be 25pc overvalued against the dollar bloc.

They believe the ECB could steer down the euro if it gave a clear signal that the tightening cycle is over.