The Spanish regional governments together owe €32bn. Most of them are close to bankruptcy and have not paid their creditors for months.
Castille and La Mancha cannot even pay their civil servants salaries. Cataluna’s budget is overdrawn by twice the set legal limit
Add this situation to the current state of Spanish banks which are rumoured to need €70 – €100bn to keep afloat.
The situation in Spain is unsustainable in the long term without financial assistance from both the IMF and the EU stability fund. They will have to come clean eventually. Probably after the general election next spring.
The truth is that markets although aware of this grim situation, cling on to the strong economic performance of Germany and therefore worry less about the peripheral states. They believe Germany will always pick up the tab in the end.
If that belief is ever shaken by negative political events in Germany, I believe the Euro is doomed.