You're gonna love this (via the Globe & Mail):
Global markets may have now priced in a full-blown default by Greece, or even the country’s exit from the euro zone. But they haven’t factored in a financial meltdown in Spain, and that is where the new focus is shifting.
Spain would be a much bigger problem than Greece, just as a matter of size. It has debt of some 735-billion euros, of which 175-billion euros matures this year. In comparison, Greece’s debt amounts to about 300-billion euros.
Spain is working on a new plan to bolster its failing bank industry and Prime Minister Mariano Rajoy says the government will detail new financial reforms this Friday.
But the bearish economist Nouriel Roubini says Spain’s problems cannot be fixed from within. In a Financial Times editorial on Wednesday, he argues that the country needs direct capital injection from the EU bailout fund.
The problem is that both sides are resistant to the move. Germany, already burned by Greece, doesn’t want to give more money without strict fiscal controls. And Spain doesn’t want to give the EU control over its banks, Mr. Roubini says.
Now lucky, Spain's robust 23% unemployed economy will cushion the blow when the inevitable mass-bailout actually happens.
BTW, Roubini usually gets the big macro picture right in the end, where he fails (repeatedly) is in terms of what his progonostications will mean for markets.