Stephen Kinsella: Madrid's path is a rocky road
Spain is running down the same path Ireland did. The path leads to national insolvency, over-indebtedness, bailed-out zombie banks that won't lend, and a concomitant loss of sovereignty. Spain's problems begin and end with its banks, like ours did. But there are important differences between Ireland and Spain.
But first, we need to dispel some myths. If the Spanish bank bailout is, in real terms, the same as the bailout Ireland's banks received, then the rivers of ink spilled in anger about the differences between our own situation and the situation in Spanish will have been for nothing.
The way to understand any economic situation is to stress test the situation with an extreme scenario. So, just imagine this scenario: Spain's banks suffer huge losses, on an Anglo-Irish scale, say of around 50pc, on the property portions of their portfolios. It gradually becomes clear that very little of the €100bn lent to those banks will be coming back to the European authorities.