Spain was downgraded today, and now concerns over a minor Greek crisis are growing into the threat of a massive Spanish meltdown.
Spain would not be a minor blip on the world’s economic radar. Spanish banks have received a tremendous amount of financing from the European Central Bank (ECB).
And Spanish banks also rely on interbank credit dwarfs Ireland and the rest of Europe, exposing those counterparties to banking sector risk.
Combining this likely banking sector exposure with sovereign debt exposure, it looks likely France and Germany will face significant problems if the Spanish crisis progresses.
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