I for one expect bank trouble in Spain before the end of the year. I give it a 70% probability, in other words, quite high, but not certain.
Why? Because from what I hear the money markets have slammed shut on Spanish banks. Only the big three can raise money these days (Santander, BBVA, and La Caixa). Everyone else is 100% dependent on the ECB for funding.
The ECB can’t carry on doling out cash to Spanish banks cash in return for their toxic waste – the Germans just won’t stomach it. When the ECB tap turns off, what then for funding?
You only have to walk down the street in Spain to see how many bank branches there are all over the place. That means big overheads. They must be some of the most bloated banks in the world. And you know what happens when banks with big overheads struggle to get funding? They run out of money. Perhaps the rumours start before they actually run out, but then it doesn’t matter: people start queuing up to get their money out. We saw it in the UK not so long ago.
Looking further down the road, expect galloping inflation. When that happens, property isn’t such a bad thing to own.