by political editor Paul Francis

Kent County Council has stopped investing millions of pounds in the Spanish bank Santander amid concerns over the state of the country's economy.

The council has decided to stop overnight deposits with the bank amid continuing worries about a growing banking crisis in Spain.

KCC says the decision is temporary, but it was looking for assurances that the UK arm of the Santander bank would not be used to prop up its principal Spanish division.

Cllr John Simmonds (Con), KCC cabinet member for finance, was due to meet bank representatives today to discuss the issue.

The council has only been using Santander for overnight deposits, but has at times placed £3m with the bank.

Cllr Simmonds said: "I do not want to point the finger at Santander, but I want to be sure they cannot draw down money from their UK branch to prop up the Spanish arm.

"We are not saying that we are withdrawing completelely but we are choosing not to at this time. I do not think that Santander is as badly affected as other Spanish banks and is probably the strongest."

KCC had recently added Santander to its list of approved banks and was earning interest on its overnight deposits of between 0.8 and 0.9% - more than it wax earning with deposits made with the Treasury.

The council was among many authorities who were caught out by the banking collapse in Iceland several years ago, although it is on course to recover the £50m that it had invested with three banks there.

A cross-party committee of councillors recently voiced concerns about KCC's involvement in Santander and urged the authority to reconsider its policy.

Santander says that it is ring-fenced from its parent bank and "money raised in Britain stays in Britain".

The jitters reflect wider fears over the state of Spain's banking system after the government in Madrid announced a plan to clean up its banks and deal with toxic debt.

A Santander spokesman said: "Santander's UK business is strong and has a stand-alone credit rating that is one of the highest of any UK bank."