In a season of nightmare projections for Europe, this one could be the scariest: Greece leaves the euro currency union at the same time that Spain’s banking system is collapsing.
In many ways, the market convulsion last week was a test run for those crises, as political deadlock in Greece and mounting fears over the health of Bankia, one of the largest consumer banks in Spain, converged. . . .
The money available to Europe within its main bailout fund, about 780 billion euros ($997 billion) would not be enough to handle the twin calamities of a Greek euro exit and a Spanish banking implosion.
And despite recent statements from Germany and leaders of the Group of Eight industrialized nations to encourage economic growth in the eurozone, Europeans may have little desire to continue financing the debt disasters of other countries.
“When you have Greece and Spain happening at the same time, the problem becomes exponential and very, very dangerous,” said Stephen Jen, a former economist at the International Monetary Fund who runs a hedge fund in London. “So far, the policy has been to buy time and build a firewall – but that just makes the cost bigger. There is just no good ending here.”
The numbers do look dire.
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Let the banks who made bad loans fail!!!!
Danger lies in that they made the bad loans to governments, and government have a lot of guns.