The leaders of Spain and Portugal today demanded that the euro zone speed up efforts to create a banking union and complained that credit is frozen in their countries, preventing economic growth and crucial job creation.

Many banks are lending at relatively high rates because they are worried about the weak economy.

Those higher borrowing rates are making it difficult for households and companies to spend and invest.

"The money from the banking system isn't getting to the businesses or into the economy," Portugal's Pedro Coelho said after meeting with Spanish Prime Minister Mariano Rajoy.

Their bilateral government summit in Madrid came as European finance ministers were gathering in Brussels to discuss the continent's financial crisis.

Both Rajoy and Passos Coelho called on the European Union to move swiftly to create a regional banking union and to slow down budget cuts to help the economy grow.

"Investment is the only way to create jobs," Passos Coelho said. "If there's no financing, it'll be very hard for companies to grow and build up their business,'' he added.

Spain has been in recession for most of the past four years and has a record 27.2% unemployment rate. Portugal, with a 17.7% jobless rate, is one of four euro zone countries to have received a sovereign bailout.

Both leaders said that more must also be done to reduce the crushing unemployment rates, which are particularly high for young people.

Meanwhile, Portugal's president is convening a seldom-assembled advisory body of senior figures, amid splits in the coalition government over austerity measures and demands by the main opposition Socialist Party for new elections.

President Anibal Cavaco Silva announced on his website that the Council of State, which normally meets during times of crisis, will discuss the country's economic prospects once its bailout programme ends in a year's time.

Portugal needed a €78 billion rescue in 2011 when it fell victim to the euro zone's financial crisis.

But the head of state and his 19 counselors will find it hard to avoid debating rising political tension over the latest pay and pension cuts, tax hikes and layoffs.

The Council of State is to meet May 20. Its deliberations are confidential.