Spain is Now Facing a Banking Crisis and a Sovereign Crisis At the Same Time

Phoenix Capital Research's picture


Last year I wrote a piece in which I noted that the EU would implode before the end of 2012. The reason for this was clear as day: EU banks needed to roll over hundreds of billions of Euros’ worth of debt (possibly trillions) at a time when interest rates would be rising as sovereign bonds fell in value:


At that time I wrote:


This is not a question of “if,” it is a question of “when.” And it will very likely happen within the next 10-12 months if not sooner depending on how soon Greece defaults.


The reason that this is guaranteed to happen before the end of 2012 is that a HUGE percentage of European bank debt needs to be rolled over by the end of 2012.


Between now (autumn 2011) and then (end of 2012)…


  • French banks need to roll over 30% of their TOTAL debt.
  • Spanish banks and Italian banks need to rollover more than 33% of their TOTAL debt.
  • German banks need to roll over nearly 40% of their TOTAL debt.
  • Irish banks need to roll over almost HALF (50%) of their TOTAL debt.


Let’s fast forward to today to focus on Spain’s current predicament:


Consider the following…


  1. Spain’s banking system is roughly €3 trillion in size (3X Spain’s GDP).
  2. Spanish banks’ gross borrowing from the ECB was €316 billion in April.
  3. Spanish banks need to roll over 20% of their bonds (roughly) €600 billion this year.


Anyone can see by this a simple “back of the envelope analysis “that Spain will need a lot more than €100 billion to recapitalize its banks.


How on earth Spanish banks can roll over €600 billion in bonds at a time when the global bond market has just learned that all private bondholders will be subordinate to the ESM is beyond me (read: it won’t happen).


And thanks to a €100 billion bailout which has put Spain’s REAL Debt to GDP at 146%, Spain is now facing both a banking crisis AND a sovereign crisis simultaneously. There is no entity on this planet that can shore up both the Spanish banking system as well as the Spanish Sovereign bond market.


To be blunt, I fully believe that this €100 billion bailout for Spain’s banks has put Spain in a “checkmate” position. With total unemployment at 25%, a housing bubble that continues to collapse, and an official Debt to GDP ratio of 146%, there is no way Spain will be able to grow its way out of this mess.


Put another way, Spain is a financial tsunami and the €100 billion is an emergency levy made of questionable materials built unqualified engineers: the move has bought some time, but the relief will be brief.


This is why Spain’s Credit Default Swaps (essentially bets that Spain will default) have nearly doubled in 2012 alone. And the bailout has done nothing to assuage investors’ beliefs that Spain is in BIG TROUBLE. Indeed, we’re heading back towards all time highs already within one week of the bailout.


Put another way, Spain is toast. I’ve already assessed that none of the key players (the IMF, the ECB, the EFSF, or the ESM) has the firepower to prop up Spain whose real capital needs are more in the ballpark of €300 billion -€500 billion.


Thus, it’s GAME OVER for the EU. Sure it may take a while for this to manifest as politicians offer various hair-brained schemes to attempt to put off the inevitable debt collapse, but that debt collapse is coming and it will hit before the end of 2012.


On that note, if you’re not preparing for the collapse of the EU, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investments (both direct and backdoor) will profit from it.


This report is 100% FREE. You can pick up a copy today at:


Good Investing!


Graham Summers


PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.


And ALL of this is available for FREE under the OUR FREE REPORTS tab at:



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Lazane's picture

Most of these Spannerds folk spend  1/2 their days sitting and lying around doing absolutely nothing but catching zzzzz, I would not lend to them a fucking thin dime. 

q99x2's picture

Awh...Fuck Spain. Markets up. QE coming. The next year is going to be great. No one can predict what will come. Trust your higher power. Don't go overboard using your will and all your resources to control. 401Ks are headed up. Live long and prosper. Does a bear shit in the woods. Do you walk to work or carry your lunch. I know everything hasn't been quite right with me. Dave I really think I'm entitled to an answer to that question. sldkjnfx13 lsdgggeels 23.,mlis80 10001000100010100010100110100


q99x2's picture


WhiteNight123129's picture

LOL, fuck have some booze.

Jack Sheet's picture

"emergency levy"

maybe you mean "levee"??

JeffB's picture

There'll probably be some emergency levies as well. Of taxes that is.


mind_imminst's picture

ctrl+P to infinity - Spanish banks will be "saved".

Chief KnocAHoma's picture

I think the World will finally wake up and do one of two things:

1 - We'll become tone deaf to this constant birage of doom and fear, quit listening, and tptb will have to resort to even more serious measure to force us into more servitude.


2 - We'll finally call bullshit, become tone deaf to this constant birage of doom and gloom, and ingnore tptb attempts to scare us even more, thus breaking the chains of this enslavement, and turning them against each other to eat their own.

I choose 2.

JeffB's picture

I don't understand how ignoring them will result in "breaking the chains of this enslavement, and turning them against each other to eat their own."

It seems to me that too many people have been ignoring them for too long, and some action is required to break their vicious hold on the world economy.

I think Edmund Burke (or whoever) had it right when he said, "All that is necessary for the triumph of evil is that good men do nothing."

Chief KnocAHoma's picture

I am not advocating "do nothing". I am advocating not to be ruled by fear. The next time the banks run to sugar daddy on the hill, my rep had better not vote for even $0.01 in any form of aide.

Should he prove to be spineless again, I shall stand on my stump and scream to the high heavens that he is a spineless worm, and everyone else should do the same.

Our reps have to answer to us the voters, and had they done the right thing in 2008, our economy would be booming right now. 

Sure thousands of people would have lost millions, but millions would be making thousands now. It would have been REAL REDISTRIBUION of wealth rather than some fucking campaign slogan promising to soak the middle class on behalf of your local welfare child machine.

JOYFUL's picture

Spain is toast...Greece was toasted...Italy, Portugal, Ireland will be roasted!.....yu ghouls never let up!

The simple truth is that the countries which yu vampiric entities victimize here on a daily baisis are a generation or two closer to the times when....

folks got to market on a mule, and after bringin in the yearly harvest of ---oil/wheat/fruit/storage brassicas/nightshades/and nuff dried grass to feed Bessie n the sheep squadron...stayed home for the winter n made whoopee n  music - to the light of beeswax candles n a bit o kerosene...

yu fat phucks in the [formerly known as] "developed world" are doomed as of 72 hours after the lights go down at the last CITGO station and the Safeway Store Sign Says...Sorry no Sausage Today...Check back with us Saturday...


It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investments (both direct and backdoor) will profit from it.

What yu call "profit" Graham, I call payback....n yu n yurs got a wack of it comin!!!!!!!!!

Spain, and the other Atlantean provinces, gonna be for yu n yurs,,,,hey, to be a Bagholder don't it!

Chief KnocAHoma's picture

Yeah yeah... We've been hearing Greece is done for several years now.

Whatever! Pass me those Ipad bugs and turn up the music.



skepticCarl's picture

Equity markets are expecting Print, baby, Print.  Get long PM's and stocks.

HungrySeagull's picture

That recent El Gordo Lotto must have stripped the Spanish Treasury...

SmoothCoolSmoke's picture

I'd love to see Bernankie's plan to print.....and still not destroy the world ecomomy.  You know he's got one.  May not work, but he's got a plan.

shovelhead's picture

I think Mutti is gonna get kicked out of the DJ booth and they're gonna slap on their favorite mix...'Just Push Print.'

Heat da house.

Moe Howard's picture

I can't afford any more of these free reports.

imbrbing's picture

If you re-hypothicate something that is free, does one free report turn in to 10 or 1000 free reports?

mirac's picture need to be trading the CDS shit.  Me?  I don't have a bloomberg terminal or possibly know the stock symbols

Vince Clortho's picture

Print print print


Problem solved

El Oregonian's picture

Much appreciated. Thanks for your well thought out summaries.

diana_in_spain's picture

the guardia civil is shooting at striking miners in spain, watch the video

Satan's picture

They want their 300 Million subsidy to be left untouched. Fuck em.
Coal mining in Asturias is a complete waste of time. Those mines stopped being profitable in the 80s.
Asturian miners have been a pain in the ass since Roman times.

JOYFUL's picture

Hey Sheitan! Boy, I bin waitin so long* for yu to show up in the "flesh" here! yu...

we stopped bein "profitable" to yu n yurs long time fore the "80s" boyo...we bin a thorn in yur side since even before the Roman Republic instituted hinterland Ripoffs as the "Real" Economy...

we never "Really" bought yur bullshit...and now that yu an yur Bankster Buddies is facin Ter-min-a-tion...we don't wanna get mad at yus...we jus gonna get even...

Mieres. Oviedo. Gijon.... La fábrica de armas de Trubia - CNT\FAI

Compadres, a la Ensignia del Don Pelayo...con Gaita y Tambor!
*so, so long...y "vaya con dios"....sucka!
Satan's picture

You wouldn't happen to be a Welsh coal miner now would ya?

But I'll give you a green arrow for some Spanish history knowledge.

ATM's picture

Well, when you've been promised something then worl for it it doesn't matter if it was a profitable enterprise for someone else. You think you deserve what you worked for. Makes people pretty damn angry to get shafted. they tend to demonstrate, riot then kill when it gets bad enough.

lakecity55's picture

I guess the subscription contains plans for a bunker, how to stash food, PMs, and how to build an ammo dump.

1100-TACTICAL-12's picture

Don't be hard on Grahm. He's good for a daily dose of doom.

Bansters-in-my- feces's picture

"no entity on this planet"

Never heard of the Red Shields I see.

disabledvet's picture

You could argue that all the ECB is doing is financing an (albeit very expensive) exit for Spain actually. The euro-zone will be much smaller of course...but the fact that French yields are so low says to me "they're up to something."

TahoeBilly2012's picture

Give the guy a break, he lays out specifics in a concise manner which he can be held accountable for. He admits he has been early. If the do print big and save the day, Summers will be wrong. If they don't or are late, he will be correct. Let's see what happens.

ATM's picture

How does printing save the day? It is just another form of default that is more insideous and causes everyone to lose rather than just the losers.


JeffB's picture

That's true, but it kicks the can down the road and no one really counts it as a default.

The U.S. has been doing it for awhile now and many are pointing to the U.S. and admonishing the Eurozone countries to follow their model. Look how much better they're doing (for now). In fact critics like Nobel laureate, Paul Krugman is attacking the U.S. for not spending and printing much more.

It'll be interesting to see how it all plays out in retrospect from a few years down the road. Too bad we'll have to live through it in real time.


mrktwtch2's picture

tell us something usefull that we dont already who will win the superbowl this year..and what happens to all the 2012 whackos on dec 22nd do they get there money

LawsofPhysics's picture

No shit Graham, the U.S.S.A. isn't too far behind either.

falak pema's picture

no problem, its only funny money, hot off the press! 

Winston Churchill's picture

It is playing out as his forecast,timing is like watching paint dry.

Freudian slip.Does Graham have a pate problem?

Surely its HARE.As in Alice in Wonderland.

NotApplicable's picture

Thing is, he acts like it's a natural event, rather than a premeditated political one.

To make "market" predictions of such an environment is but to carry water for the manipulators.

As long as fiat is accepted as payment for goods and services, they will continue to "loan" it to themselves.

Eventually, all sovereign debt will be ZIRPed into one giant mass, and it will be used as the basis for the next global fiat experiment.

To think these central banksters can't roll is to misunderstand their function. They exist only to help each other roll in a "balanced" fashion (or what we see as a controlled collapse).

lasvegaspersona's picture


Watch to see who does the bailing out. it will not the the ECB. THEY protect THEIR currency from debasement. The Fed will likely do some rescuing. The ECB will preserve the currency at all cost. It will allow sovereigns to default and some banks to suffer but it will not allow the Euro to collapse as everyone and their mums keep saying. Once again and all together now: The ECB is not the FED. The ECB does not print the reserve currency...they plan to...this time it will work...because there is not one single human (like Obama can Bernacke) who can call Mario Draghi and say "print or you are fired". The currency was designed to overcome this inevitable urge to debase. It was designed to function whether politicians behaved or not. Politicians come and go, Central bankers don't trust them at all (that is to say they trust that they WILL debase). When it is show time I believe all ZH will be surprised at the Euro's survival. Banks and countries in ruin but the Euro still functions.

I got 6 negs for this yesterday lets see how many I get today...

Ghordius's picture

+1 from me. and I agree on the basics of the design. this is not something some banks would like to hear, they prefer their own propaganda version that says it was designed by baboons on drugs. we'll see.

Element's picture

Think you're wrong on this one Ghordi ... unrepayable debt has always destroyed currencies. 

Euros may re-birth and retain the name 'euro', with a reformed member list, and probably it will, but the present euro is going to flop spectacularly.

What's this now, Russia's sixth version of the Ruble?  Wiki says, "rouble was derived from the Russian verb ... (rubit'), meaning to chop ... a certain weight chopped off gold or silver ...",  the current rouble ain't what it used to be, but it still works in trades.


Fiat money (in my view) is an extendable promise, but it keeps increasing (printing it to cover already broken or missed promises just increases the promises further, paradoxically requiring more printing), backed by useful stuff in demand, that the state has in sufficient abundance, or can supply on demand.

This is the case now, with all fiat systems.  So gold definitely is not necessary for that, and actually makes even less sense, as backing for the promises, it is just a temporary substitute, for getting what you really need.  It's just a great store and transmitter of buying power, when the promises fail to match the resources and capacities reality of the States.

The European system clearly has a lot of valuable resources and assets.  And debt can be a pseudo-'asset', but only up to a certain point.  The more productive the debt has been invested, the higher that point will be, but the more misallocated the incurred debt-money, the lower it can become, BEFORE THE DEBT THEN BECOMES A NET AND GROWING LIABILITY.

Rogoff and Reinhardt (CFR) showed historically that this occurs at around 90% or debt-to-GDP level - on average.  Many MMTer's want to pretend this does not really matter, that the Sovereign is unconstrained, and is thus theoretically good for it, but they forget that misallocation of resources and investments destroys your money promises anyway, and that printing more promises, just accelerates the NET growth of liabilities.

It doesn't matter what you call the money used.  If you have lots of stuff that people want, you can generate sufficient or at least some confidence that the state((s) - non-Sovereign) can back these promises.

Unrepayable debt in a union means, the ENTIRE system is responsible for meeting these promises.

But the debts are now TOO BIG to generate confidence that the promises and material backing are viable, within the necessary timeframe(s).

And they are rising exponentially (while Brussels acts like, or even thinks that it's ratings-agencies and speculators that are screwing-up the euro system? ... lol )

But Germany definitely can back its own promises even better relatively now, than to be responsible for the  ENITRE system of euro promises to be repaided, rolled-over and serviced.

So the euro systems is just plain buggered, so Germany will abandon ship, at some point.  It is not going to just sit there and get dragged-under.  It will be scary and cold in their lifeboat, but not ... that ... bad.

The euro just isn't needed, because individual currencies can reflect the true material state and demand on the stuff that state actually has, and can supply, on demand, in exchange, or in payment on the promises made.

That simply reflects reality more clearly.

Greece should never have been in the euro, and definitely can not stay in the euro. It was an unsustainable political and geopolitical decision (a "nice-to-have, but not essential" addition); by the core itself.  And now it must be undone.

And that will destroy remaining confidence in the promises being able to be met.

And Greece is only a minor side issue anyway, in terms of existing irredeemable euro promises.
 Face it, this is going to be the case Ghordi, the still exponentially growing unrepayable promises are going to destroy the eurozone system.


PS:  I sincerely commiserate with Europeans ghordie, I can't (yet) imagine how wearing and heart-in-your-mouth it must be for so many who wake-up each day and 'see' the bow of the euroship already under the water.  All the best to you all and I hope we can help-out, at least a bit, when it's really needed.  All the best.

Element's picture

Ok, but the IMF and Brussels seems to be begging for money off everyone right now.

Which would suggest it isn't going to get rolled.