Spain is the presumed final domino in the eurozone, with its fall potentially spelling doom for the currency. The problem with Spain is its size, especially the funding needs of its banking sector.
This chart from Societe Generale shows just how tiny they problem of Ireland is in comparison Spain. Its largest banks, Santander and BBVA, dwarf Ireland’s. Now banks in Spain are offering as much as 5% interest on deposits, in an effort to backstop their positions.
2011 and 2012 look to be particularly difficult years in terms of funding needs for these banks. If they come calling for support from Spain, the eurozone bailout fund, as it stands, will likely not have enough funds to provide help.
From Societe Generale:
Photo: Societe Generale
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