Spanish bond yield have also moved higher with the 10 year bond yields crossing the 6% mark. Rising bond yields could reach unsustainable levels, causing severe problems for the country. Reports also surfaced that investors had taken out staggering sums from the troubled Bankia.

Spain is Europe's fourth largest economy and much bigger in size than Greece. Any setback in the country could lead to a contagion effect in the European region.

Meanwhile, there are fears that there could be a run on banks in Greece. A caretaker government has now been installed in Greece ahead of fresh elections set for June. Markets have reacted negatively to happenings in Europe with the global indices going into a tailspin in the last few days.

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