News Analysis: Eurozone crisis to dominate G8 summit

WASHINGTON, May 15 (Xinhua) -- The eurozone crisis will top the agenda as leaders of eight of the world's industrial nations arrive in the United States for the weekend's Group of Eight (G8) summit, U.S. experts say.

Indeed, the ongoing crisis is one that impacts Europe as well as the rest of the globe, and this G8 summit comes at a critical time, just as Greece struggles to form a government amid financial turmoil and Spain seems poised to be the next domino to fall in the embattled eurozone.

The summit also comes amid global concern -- including among G8 members Britain, the U.S. and Canada -- that eurozone governments have not been grappling with the issue of Spain's indebted banking sector decisively enough.

"I think (the non-European G8 countries) would be wise to press the European leaders at the summit for a more rapid treatment of the problem of the Spanish banking system," said C. Randall Henning, a visiting fellow at the Peterson Institute for International Economics.

Spanish banks are carrying a heavy load of bad loans stemming from a real estate sector that tanked after the country's housing bubble broke -- much like the crises that crippled the U.S. and Irish economies -- and some experts fret that Spain cannot bail out the banks on its own.

Making the problem worse is that many Spanish banks are loath to face the situation head-on and accept painful write-downs, which in turn just kicks the can down the road, analysts said. That has led to troubles in Spanish markets, with the country's IBEX 35 stock market on Monday dropping to levels not seen since October 2003.

"The past four years have witnessed a crisis of unprecedented proportion in the Spanish financial sector in its history," reported the International Monetary Fund last month.

With home prices having plunged 30 percent in Spain, compared to 50 percent in Ireland and 35 percent in the U.S., analysts predict their values will continue to drop.