The Spanish banking system is insolvent and the Spanish government simply does not have the wherewithal to clean it up. This is the problem in Spain that has come to a head, particularly now after the rescue of Bankia, Spain's fourth largest bank. Unless the European Union come to Spain's rescue, there will be runs on Spanish banks, with contagion rippling outward.
In this essay I will outline the key issues starting with the history and working through to the present concerns and then speak briefly to the best temporary resolution.
Property bubble and bust
Last month I covered the Spanish fiscal situation in the post "Spain is in big trouble". While the fiscal situation is worrying, it is only a problem for Spain because of Spain's banking system.
Spain had a terri...
As this site is now reader-supported via Patreon, the remainder of this article is only available to subscribers at a specific patronage level. Articles at patronage levels BRONZE, SILVER, and GOLD are denoted by the categories in blue capital letters above the post. Posts categorized DAILY are available to both SILVER and GOLD patrons.
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.