There have been very few days lately when worries about Europe's debt crisis weren't growing.

As Spain struggles to shore up its third-largest bank with a $24 billion bailout, the country's borrowing costs continue to go through the roof as fears lingered about a possible run on its banks.

Wednesday brought renewed signs that things could get even worse, and those fears spread to U.S. markets. The Dow Jones industrial average fell about 1.3 percent, to 12,419, but banking stocks were down even more sharply. Citigroup dropped 3.8 percent, JPMorgan Chase fell about 2 percent and Bank of America slid 3.1 percent.

But there are also signs that European officials continue to look for new solutions.

The European Commission on Wednesday proposed a "banking union" for the 17-country eurozone. "The Commission has indicated the main steps towards full economic and monetary union, including a banking union; euro area financial supervision and euro-area wide deposit guarantees," the European Union's executive arm said.

Spain's economy is weighed down by a 24 percent unemployment rate — Europe's highest — and mounting budget deficits in its semiautonomous regions. And it faces higher and higher borrowing costs.

The rate on Spanish 10-year bonds, "a key indicator of market confidence in a country's ability to pay down its debt, shot up 25 basis points Wednesday to 6.67 percent — matching the level it hit at the height of the eurozone crisis late last year, according to financial data provider FactSet," the Associated Press said. The yield later fell back to 6.55 percent.

Reuters says investors " are worried that public finances in Spain, which is already struggling to cut it large budget deficit at a time of recession, will become unsustainable if it is forced to bail out is banks, after a real-estate market boom turned to collapse and left nearly all banks laden with bad property loans."

As the Wall Street Journal explains, "The fear is that even if the government gets the required bank aid from the bailout fund, it would damage its efforts to raise money from the bond markets to finance the rest of its operations."

So the European Commission suggested a central fund that would be in charge of paying for bank bailouts throughout the eurozone. "That would protect individual governments from having their public finances overwhelmed by the cost of rescuing a bank," AP said.

Just how such a fund would work has yet to be determined and it isn't clear whether it would be approved. But it does show that European officials haven't run out of ideas for dealing with the Whac-a-Mole-like crisis.

In the meantime, the Commission said Wednesday it will recommend giving Spain until 2014 to meet the EU's budget deficit targets. Spain is currently required to cut its deficit to 3 percent of gross domestic product in 2013 from last year's 8.5 percent.

Update at 4:21 p.m. ET. This post was updated to reflect stock market closing prices.

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