The financial turmoil on the continent gathered pace on Friday after a key agency downgraded the credit rating of 16 Spanish banks, including the debt rating of Santander UK, a subsidiary of Banco Santander.
European markets suffered further losses after Moody's Investor Service downgraded the Spanish lenders.
The agency said the downgrade was due to financial challenges facing the Spanish economy, concerns over the Spanish government’s ability to prop up the bank, as well as exposure to bad debt from the country’s ailing property sector.
Following news of the downgrade, Santander UK moved to reassure its customers citing the fact that it was a "completely autonomous" subsidiary from its parent firm.
A spokesman for the UK bank, said: "money raised in the UK stays in the UK", adding that there would be no impact on its business.
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The downgrade of the Spanish banks comes amid ongoing concerns in the eurozone, with Spain likely to be dragged further into the maelstrom should the crisis in Greece fail to stabilise.
As Spain's woes deepened, investors continued to be troubled by political turmoil in Athens, where a caretaker government has stepped in to steer the debt-ridden country into repeat elections next month.
Jordan Lambert, trader at Spreadex, said the "environment is getting increasingly bleak" with Moody's downgrade of the Spanish banks adding to the "sour taste".
The FTSE 100 Index lost nearly 1%, while France's Cac-40 fell 1% and the Dax in Germany lost 0.5%. Spain's Ibex-35, however, rose 0.5%.
On Friday, David Cameron is scheduled to meet new French president Francois Hollande as they join world leaders in the US for a G8 summit, which is likely to be dominated by the eurozone crisis.
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A 19th Century Wild West horse and carriage come London Hackney cab took to the streets of London today to launch new TV Western series Hell on Wheels, which premieres on TCM this Sunday 20th May at 9pm, as Londoners, commuters and tourists were treated to a taxi ride with a difference.
Picture date: Thursday May 17, 2012. ÊOnce the original form of the much loved London Hackney Cab, the 19th century horse and carriage was Ã"pimped' with a 21st century taxi complete with leather seating for six people, an electrical outlet for laptops and ipads, an oil burning lantern and a working London Hackney Carriage style Ã"FOR HIRE' light. Photo credit should read: Geoff Caddick/PA Wire
A Green-winged Dove chick with his father at the Edinburgh Zoo. It has been a busy time for the Brilliant Birds residents at the Zoo, as the youngsters took flight and left their nests.
Picture date: Thursday May 17, 2012. Several chicks put their flying skills to the test for the first time earlier this week. The youngsters who have taken flight in the last month include; three green-winged doves, three chestnut-backed thrushes and a Nicobar pigeon. Photo credit should read: Danny Lawson/PA Wire
Protester of the 'Blockupy' movement have pitched tents at the Roemerberg in Frankfurt Main, Germany, 17 May 2012. Police are out in force to prevent riots during the days of action by groups critical of capitalism. Photo: BORIS ROESSLER
Cadets walk in a sally port at the U.S. Military Academy in West Point, N.Y., on Thursday, May 17, 2012. (AP Photo/Mike Groll)
Fireworks light up crew members and honor guard during the national anthem before the NASCAR Pit Crew Challenge in Charlotte, N.C., Thursday, May 17, 2012. (AP Photo/Chuck Burton)
A chandelier is seen from underneath during a preview of the Chihuly Garden and Glass exhibit at the Seattle Center, Thursday May 17, 2012, in Seattle. The new, permanent 1.5 acre exhibit is located near the base of the Space Needle and opens to the public Monday, May 21. It looks at the career of artist Dale Chihuly and features an eight-gallery exhibition hall, conservatory and garden as well as a cafe with a selection of Chihuly's collections of vintage accordions, radios, clocks and other mid-century memorabilia. (AP Photo/Elaine Thompson)
Crew members for driver Jimmie Johnson celebrate after winning the NASCAR Pit Crew Challenge in Charlotte, N.C., Thursday, May 17, 2012. (AP Photo/Chuck Burton)
Actress Ino Menegaki, dressed as a high priestess, lights the torch at a ceremony in Panathinean stadium in Athens, Thursday, May 17, 2012. The torch begins its 70-day journey to arrive at the opening ceremony of the London 2012 Olympics, from the Greek capital, to cover about 8,000-mile (12,875-kilometer) on its progress over many parts of England to start the games. (AP Photo/Petros Giannakouris)
French bullfighter Sebastian Castella is gored during a bullfight of the San Isidro's fair at the Las Ventas Bullring in Madrid, Thursday, May 17, 2012. Castella continued with the bullfight, bleeding from his injured groin. Bullfighting is an ancient tradition in Spain and the season runs from March to October. (AP Photo/Daniel Ochoa de Olza)
An artwork titled " The Earth and the World " by Indonesian artist Rudi Mantofani is displayed at the ART HK 12 art fair in Hong Kong Thursday, May 17, 2012. ART HK 12 is a fair showcasing artwork for sale from 266 galleries representing 39 international territories. (AP Photo/Vincent Yu)
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PA/Huffington Post UK | Posted: 18/05/2012 10:22 Updated: 18/05/2012 10:41