Spain had an estimated 350 billion euros of debt that it needed to roll over in the three years from 2011 according to analysts at Brockhouse Capital. Add in the likely need to fund regional government deficits and rollovers as well as the need to recapitalise banks as the housing market continues to decline and you see the fundamental problem for Spain.
My concern with Spain is liquidity more than solvency. Given the deflationary policy path, the high private debt levels that create higher private savings and the debt rollover, you are guaranteed to have gargantuan funding needs during a period of high deficits. For any currency user, this is a recipe for a liquidity crisis. Right now, Spain is looking good because the yields have subsided after the OMT program was put in place by the EC...
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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.