New York Times
May 20, 2012
In a season of nightmare projections for Europe, this one could be the scariest: Greek leaves the euro currency union at the same time Spain’s banking system is collapsing.
In many ways, the market convulsion last week was a test run for those crises, as political deadlock in Greece and mounting fears over the health of Bankia, one of the largest consumer banks in Spain, converged. The credit ratings agency Moody’s Investors Service downgraded the entire Spanish banking sector Thursday.
As investors gird for another challenging week, they will be hoping European leaders in Brussels, if not Frankfurt where the European Central Bank is based, can finally start to map out an action plan. It is not clear that policy makers have many good options.
The money available to Europe within its main bailout fund, about €780 billion, or $997 billion, would not be enough to handle the twin calamities of a Greek euro exit and a Spanish banking implosion.
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