Could Spain Breaks Into Separate Countries?

Phoenix Capital Research's picture


Spain was already experiencing a banking crisis as well as a sovereign crisis. It’s now on the verge of a constitutional crisis (as well as its ongoing sovereign and banking crises).

Secession crisis heaps pain on Spain

Spain lurched further towards a full-­?blown constitutional crisis as Catalonia announced a snap election potentially opening the way for the country’s most economically important region to declare independence from Madrid.

As police in the Spanish capital barricaded the Spanish parliament against anti-­?austerity protestors, the government of Mariano Rajoy vowed to stand firm against a drive by Catalonia for secession as the Spanish leader faces the most critical period of his premiership.

“The hour has come to exercise our right to self rule,” said Artur Mas, Catalonia’s president. He called the vote, which is likely to be cast as a proxy referendum on Catalan independence, after Mr Rajoy last week rejected his demands for greater fiscal autonomy, triggering a wave of nationalist sentiment in the northern region.

The political turmoil within Spain came amid signs that a German-­?led group of eurozone countries were attempting to roll back an agreement reached in June that would free Spain of tens of billions of euros in bank bailout debt.

Under the June deal, Spain’s €100bn bank bailout would be shouldered by the new €500bn eurozone rescue fund, the European Stability Mechanism, rather than the Spanish government.

On paper the ESM will not be given legal powers to take over the bank bailouts entirely until the eurozone politicians have agreed to a federal banking supervision system. But according to senior officials Spain has promised that its bailout will be covered even though it is scheduled to begin in November well before a final agreement.

However, after a meeting between the German, Dutch and Finnish finance ministers on Tuesday, the three said the ESM would not be allowed to take over “legacy assets” recapitalised before the banking supervision system was in place. This calls into question the markets’ assumption that Spain’s bailout and any assets put in the soon-­?to-­?be-­?created Spanish “bad bank” will be covered by the deal.­?0722-­?11e2-­?b148-­? 00144feabdc0.html#axzz27n7hfRTE

As I noted in previous articles, Spain has three options:

  • 1)  Spain goes the “Greek route” of agreeing to austerity measures in exchange for bailouts (which will implode the economy).
  • 2)  Prime Minister Rajoy refuses to impose austerity measures and is removed/ replaced by an EU technocrat who is pro-­?austerity measures (like Italy experienced last year)
  • 3)  Spain defaults/ leaves the EU.

Thus far Spanish Prime Minister Rajoy has opted to go for #1. The end result has been riots, protests, and now the threat of Spain as a country breaking up. I’ve long averred that Spain will bring about the break up of the Euro. By the look of things, we’re not far from this.

To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.

Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).

Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too…

Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the Ibex is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)

“So what?” many investors will ask, “Spain is nothing in the grand scheme of things.”


Spain’s sovereign bond market is $2.1 trillion in size. And Spanish bonds are used to backstop hundreds of trillions of Euros worth of derivative and credit trades.

So when Spain defaults (and it will eventually) all of these assets become worthless. And all of those trades blow up. Imagine Lehman times ten.

On that note, smart investors are taking advantage of the time before this happens to prepare. At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners from this debacle. We have a host of FREE Special Reports devoted to helping readers prepare for the coming Debt Implosions in Europe.

All of this is available 100% FREE at

Best Regards,

Phoenix Capital Research





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Zero Govt's picture

Graham, care to take another shot at when Spain implodes?

dumpster's picture

Give me one winning trade in two years

Hows about your $250.00 for my suspect newsletter

max2205's picture

X ten... What are we going to do with you.

This whole euro thing is done and was done. Let it go. It under control

Ben is printing for all at 40 bill per month leveraged at 40 X and swapping
With the ECB.

GIVE ME ONE WINNING TRADE you've made in 2 years!?

akak's picture



Yes, of course.

It is the rarely used 3rd person conditional pluperfect subjunctive tense.

greggh99's picture

So now ZH won't even proof read the headlines.

jonjon831983's picture

Meh. There are numerous spelling mistakes n such in contributor postings if you really want to catch them.


I understand the disdain for glaring grammatical and spelling errors, but try to reach above it and instead go for the point of the article.

greggh99's picture

But in the headline? Maybe you're right. Maybe the expectation of mere competence is too much.

s0lspot's picture

Living in Spain for the last 2 years down in Andalucia, biggest & poorest region, I can confirm that Spaniards are indeed wise "socially". The decentralized structure of power that was the result of Franco's demise does mean that power & people are brought closer which is a good thing. Autonomy of provinces (each has its own parliament) allows for social & cultural progressiveness (???) much more than in France, England or Italy.

I also confirm that their political caste (at least the 2 big parties) is so mediocre that I do not see Mariano "El Payaso" Rajoy finishing his mandate. Half of national deputees have been or are currently being prosecuted for corruption issues. This is not Italy, France or England where corruption is not prosecuted ; here 2 or 3 times a week you see images of mayors, entrepreneurs, MPs, policias, lawyers etc getting arrested on national news.

I believe just like in the 30's that Spain will resucitate La Republica and lead the West towards a saner socio-politico-economical social pact enacted from the pleb up. The Spanish Republic of the 30's was and still is the closest Humans got to a real uncompromised and horizontal country-wide organisational system. Obviously neither the west (UK, Ger, FR, IT, USA) nor the Soviets were too eager to let this experiment in autodetermination & organisation go too far, so they helped the fascists. Let it be noted for posterity that the french gov created concentration camps all along the border to catch fleeing republicanos and cage them just like the Nazis did. Because they were fighting not for a specific party or ideology but for Human Emancipation, they had to disappear. They fought for anarchy, which is the highest expression of order ; self-applied order.

The only country which helped the armed resistance against Franco by sending trucks & weapons was Mexico.


Anyway disgressing here, all i'm saying to you bitchez is that Retard Rajoy will either quit, be forced to quit or will be terminated. The Spaniards may have as much corruption, wine, beaches and fresh figs as the Greeks, they are extremely politicaly conscious because of Franquism & later on, corruption. They sure aren't no Greeks (no disrespect) and are 3x as numerous. I am excited to be part of this end-time here in Spain because the rest of the West feels much more socially and mentally dead when compared to everyday street people here. They're less tortured & complicated than the others and because of Franco (only 30 years ago) are very sensitive to injustice and fascist state behaviours.


Viva la Republica ²



Treason Season's picture

Nice summation though I am a little more suspect of their political rectitude than you. I was working in Madrid  '03 when the Winsdor bldg fire transpired, an arson job more obvious than the inside job of 9/11 and yet the politcal uproar from the Madrilenos was overpowering by its silence. The post Franco era fattened la gente, let's see if they can get back in shape.

THE DORK OF CORK's picture

If the Spainish nation state breaks up it will feed the Euro market state monster.

The seed of the Euro lies in the city of London........

The Euro is a creature of the City of London.

First it destroyed the UK Boffin culture of the 60s &70s via the IMF and the Jenkins wing of the Labour party and now it has destroyed Europe.

Try to get your head around a banking system that uses a "sov" currency and its close presence to Euro Vassal states.
These dynamics change everything.....
You must export goods that would have a overcapacity in a rational trade system (think German car focus)
Thus in a depression when nobody really needs a car your mercantile country will suffer most.

The Euro and the "Big Bang" of 1986 are handmaidens....this is when the UK went into chronic current account deficits only stopped for a short time by the first EMU crisis of the early 1990s.

After the Big bang the credit banks could run oil through countries such as Ireland and Spain and get a yield off the waste production.

Now that oil is scarce they must drive these countries into current account surplus (energy surplus really) so that the financial centres in New York , London and Frankfurt can remain in Deficit.
The Euro is a tool for this extraction process.

The real goods trade deficit (inc oil) of the UK was a record £100 billion in 2011.
Trade of goods balance : – 88,505m
Trade of oil Balance : – 11,509m

Is Europe a victim of unsustainable international trade /energy connections which reduces rational internal / national demand and rational investment ?

If you compare this to the year 2000 in the UK (really London as londons local hinterland is stripped clean already)
Trade of goods balance : -39,512 m

Trade of oil balance :+6,536m (peak)

And Y1991

Trade of goods balance : -11,497m
Trade of oil balance : + 1,274m

And Q2 2012
UK Q2 period in its balance of trade and current account figures.

Current account Net

Trade in Goods : £ -28.1 Billion ( largest deficit ever recorded)
Trade in Services : £+ 17.9
Income : £ -5.2 Billion (largest deficit ever recorded)
Transfers : £ -5.5 Billion

Current balance £ -20.8 Billion (largest deficit ever recorded)

Notice the negative yield income.....which means they must drive us into current account surplus by whatever means.
Ireland posted a record 3 Billion + euro current account surplus in Q2 and even Greece posted a current account surplus in July.

Now some of the deficit is works of Art , precious stones and even silver with appeared on the top 30 goods imported and exported for the first time in a long time but the net trade balance from these goods is merely a negative of a few Billion.
(Gold is top secret of course)
However the total trade of silver , works or Art and Precious stones is approx half of the UKs Motor trade now.


For every physical deficit there is a surplus...........

Spain did infact engage in some internal productive capacity creation as well as Housing and road junk.

3~ million people fly on the air shuttle from Madrid to Barcelona despite the creation of a high speed line because they use the Euro $ proxy.
This would not be the case under the peseta
The only mechanism to restore rational domestic demand and investment is a national currency.

I sympathise with the Catalans and all but whatever about Catalonia being integrated with Europe or not they sure are integrated with Spain and indeed France.

Recent Balance of trade data show rising exports to Germany and declining exports to France – this does not make any rational sense from a political economic / geographical perspective.
Catalonia has also a claim on France (on their sacred peak of Canigou) ….. what next the breakup of the French Nation state so that we can have a happy clappy European market state .
No thanks.ívia  
Ljoot's picture

Stock up on Spanish Fly.


westboundnup's picture

Spain is Europe in a microcosim.  The regions want as much autonomy as possible from Madrid, including the ability to set their own budgets and incur debt, but want to maintain the services and backstop of the federal government.

boiltherich's picture

Could Spain Break Into Separate Countries?


Sorry, I just had to correct the leading question, it was distracting. I do not think a breakup of Spain is in the works, though I defer to those actually in Spain to know more, the reality is that Spain has been a nation with one dominant culture and language, one king, an empire for a long time, and the central powers there just are not going to let the nation disintegrate. Not only that but while the different regions jockey for position to claim a larger chunk of the dwindling pie they also know that the Spanish central government is their bread and their butter, they have nothing to gain but possibly a lot to lose by going the independence route even if it were going to be allowed which it won't.

I think the only reason el Presidente has allowed this much talk of independence is to strengthen his hand with his new Teutonic bosses and the IMF regarding bailout conditions and loss of sovereignty, he can point to the nascent succession movements and say SEE, push any harder and there will not be a Spain left for you to impose your will upon.

What bothers me is the option number three above; 3) Spain defaults/ leaves the EU.

I am not pro eurozone, I believe that the euro has destroyed the economics of most of Europe while being advantageous to the industrial north, and that the people of the south suffer needlessly because of this backdoor putsch in which Germany has in effect annexed what it could not win in a world war. I am not anti German, but I am anti German control of the rest of Europe. The bothersome thing about the option #3 and which I see here and elsewhere all the time is the implication that leaving the euro automatically means leaving the EU which is separate and distinct political and treaty organization. Of the 27 member states only 17 use the euro. There is no earthly reason why a nation that has adopted the euro cannot admit it's error and adopt their old currency and still remain in the EU, in fact there is no treaty apparatus for ejecting a member state from the EU.

What really bothers a lot of us I think is that Germany and the ECB in Germany, and to a lesser degree France and the IMF which is led by a French appointee, have in essence equated the euro with the EU itself. In doing so they are making the argument that might=right, mein weg or lebewohl. And we all know Germany is never going to consent to a "United States of Europe" debt union unless they have 90% of the power within it, they will not risk joining such a union if there is any chance the Latin bloc or any other nation can override their power and feast on their surpluses by federal edict that they no longer have veto power over. And there is no federal central government where there is veto power, where there is veto power at best you can say there is a confederacy, but those NEVER survive long and cause wars as individual members attempt to gain at the expense of other confederates, while vetoing that which they do not like. Germany will only approve of a central government/debt union if Germany IS the government.

Juan Tumene's picture

"What bothers me is the option number three above; 3) Spain defaults/ leaves the EU."

Probably should have written "leaves the Eurozone".  Hardly inspiring of confidence in Phoenix Capital.

Treason Season's picture
Mass rally in Venice to call for independence from Italy.

A poll conducted by Corriere della Sera in September found that 80 per cent were in favour of independence.

dumpster's picture

pay the guy 250 and take your beating .. could pigs fly and could angels dance on the head of a pin.

Worthless speculation because of  need to fill pages .  For a clueless brand of followers of which maybe ten ..still hang on to what if propaganda

Juan Tumene's picture

They can try to searate but they'll find out the same as the air-traffic controllers: don't mess with el goobermint!

Zero Govt's picture

keep piling on the numbers and face-time and pretty soon you realise 'El Goobermint' are a bunch of scrawny midgets huffing and puffing behind a curtain

Juan Tumene's picture

It was a reference to the somewhat draconion emergency powers available to the central government of Spain.  They make TBTB of the USA seem quite cuddly.  Basically,  they can draft anyone into the military at a moment's notice - where your choices are then very simple: either do as you're fucking-well told or get court-martialled.

etresoi's picture

" On that note, smart investors are taking advantage of the time before this happens to prepare. At Phoenix Capital Research,...."

How much do you pay ZH to promote the "Ann Landers" of financial blogs, which takes any event in the world to promote its worthless subscriptions.


Juan Tumene's picture

Agreed - little more than recycled news used for spamming ZH.

akak's picture

At least he is not constantly harping about some imaginary "US Citizenism".

Make me laugh!

AG BCN's picture

Here in Barcelona is interesting to watch the Catalan politicians play the independence card, it's a distraction to hide their own incompetence and deflect the blame on Madrid. The bottom line is that if you leave the Catalans or the Spanish to do anything it always ends in a mess, just like the Greeks. They are your relative that is not good with money and always has some crisis going on. Germany got involved with the Southern Europeans at the birth of the Euro, if you don't do your due diligence then it will cost you dearly.  

Middle_Finger_Market's picture

But but but...I'm a huge fan of siestas, chilling and eating. Fuck the euro and all that technocrat hypocricy, this is culture baby. Germany are only saving themselves by funneling money into the south, it goes in one hand out the other and back into the german banks. 

Middle_Finger_Market's picture

Prepare for destitution and choas bitchez. Never underestimate the craziness of Europeans heading into a cold dark winter. 

skepsis101's picture

An old Catalan saying . . . Mas to Rajoy, "nos han futut y no nos han pagat".  

Viva Catalonia y el Pais Vasco.  Ya finalmente siga el dia de libertad, y con muchas ganas.  Gora Euskade Askatuta!

BeetleBailey's picture

Tiene usted mierda en su pantelones?

Peter Pan's picture

Fear will ensure that poltcians and cental bankers will go to crazy extremes to pull Spain back fom the brink. This is what they have done and will continue to do until the bitter end everywhere else and Spain will not be the exception.

Isotope's picture

"The National Parliaments will no longer be of any concern to us. I have just received word that the ECB president has dissolved the Parliaments permanently. The last remnants of Old Europe have been swept away forever."

"But that's impossible! How will Draghi maintain control without the bureaucracy?"

"The National Central Banks now have direct control over their territories. Fear will keep the local systems in line. Fear of this bond market."

akak's picture


"Greece is too small to make an effective demonstration, but don't worry. We will deal with your Catalonian rebel friends soon enough."

"Proceed with the operation. You may print when ready."

Dead Canary's picture

I find your lack of faith in the Farce, disturbing.

Isotope's picture

Now witness the firepower of this fully armed and operational LTRO!