In Spain, it is well-known that many of the financial institutions need more capital. However, the question is how much capital. Spain has run dubious quality stress tests that say the banks need less than 40 billion euros. Others believe that the banks will need as much as 250 billion euros (see here). This is an important point because larger losses likely mean that equity at the banks will be wiped out. The Spanish government will then need to decide how the losses will be paid for.
What's clear now is that countries like Finland will resist any kind of debt mutualisation tooth and nail. According to their finance minister Finland would leave the euro zone rather than pay for others' debt. This leaves Spain in a predicament. While Spain's government debt to GDP is still lower than Fr...
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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.