The more I read about it the more I conclude that Spain may be the straw that breaks the European camel’s back.
Why? Well, to put it starkly, it is financially crippled at the moment BUT things are destined get MUCH worse for it. Thanks, Senor Zapatero, what a wonderful legacy you socialist guys leave behind…
Spain’s prime minister warned yesterday that the country ‘cannot go on like this’ much longer with its current high borrowing rates. Mariano Rajoy also urged a joint European response to keep the region’s debt problems from getting worse. Mr Rajoy joined French President Francois Hollande in stressing their commitment to keeping Greece in the euro despite its political uncertainty.
The reason Rajoy wants Greece to stay, even though it will go, is that the markets will look to Spain post the Grexit. And when they look, they will see a corrupted banking system, massively over-leveraged on dodgy property lending hitherto hidden away from fiscal gaze. And when they factor THAT in, Spain’s borrowing costs will go through the roof and it will become Greece. At THAT point, French. German and even British bank exposures becoming frightening. What then?
It used to be said that banks offered security and safety for cash. Now they provide instability and danger. I suggest that if you have cash, the last place to put it is in a European Bank.