Tuesday , 25 June 2024

Graham Summers: Spain's Fiscal Problems Will Result in Collapse of European Union! Here's Why

On the surface, Spain’s debt woes have many things in common with those of Greece – bad age demographics and a toxic bank system – but you’ll note that, as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece. [Let’s take a look.] Words: 700

So says Graham Summers (http://gainspainscapital.com/) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Summers goes on to say, in part:


Spain’s demographics alone are setting Spain up for a sovereign debt Crisis. [Take a look:]

  • Currently there is 1 person of non-working age (65 or older) for every 4 people of working age (15-64) in Spain.
  • This is expected to worsen to 1 person of non-working age for every 3 people of working age by 2025 and
  • an astounding more than 1 person of non-working age for every 2 people of working age by 2040.

According to Jagadeesh Gohkale of the Cato Institute, Spain would need to have 250% of its GDP sitting in a bank account collecting interest forever in order to meet its unfunded liabilities without raising taxes or cutting government outlays.

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Banking System

[As bad as Spain’s demographics are] it is its banking system that really sets it apart. Let’s consider the following facts:

  • Total Spanish banking loans are equal to 170% of Spanish GDP.
  • Troubled loans at Spanish Banks just hit an 18-year high of over 8%.
  • Spanish Banks are drawing a record €316.3 billion from the ECB (up from €169.2 billion in February).
[Believe it or not], even… [the above statistics] don’t paint the real picture. Thanks to a property bubble that dwarfed [that in] the U.S. in relative terms, Spain’s economy and corporate arena are now literally saturated with debt. Consider the following:

  • Spanish non-financial corporations’ gross debts outstanding are equal to 196% of Spain’s GDP (this is worse than that of Greece, Portugal [and] even Japan)
  • Spanish non-financial corporations sport debt-to-equity ratios of 152% (only Greece and Japan are worse here)
  • Spanish household debt is equal to 90% of the country’s GDP [which is] much higher than the EU average of 70% and roughly inline with that of the U.S. which has been running a credit bubble for 30+ years.


In simple terms, Spain is like Greece, only bigger and worse. According to the Bank of International Settlements (BIS) worldwide exposure to Spain is…[in excess] of $1 TRILLION (the U.K. is at $51 billion, the U.S. at $187 billion, France at $224 billion and Germany on the hook for a whopping $244 billion).

As I have proven in previous issues, however, the BIS estimates actually underestimate the true exposure EU nations pose to the financial system. For instance, the BIS claims German exposure to Greece is only $3.9 billion… when Germany’s Deutsche Bank alone has over 2.8 BILLION Euros’ worth of exposure to Greek debt and businesses and Germany has TENS of other banks with exposure to Greece besides Deutsche Bank…

If Spain chooses…to stage a default or a messy debt restructuring, we’re going to see: 

  • systemic crisis that would make Lehman look like a joke,
  • the breaking up of the EU and
  • a bear market in bonds (which we have not seen in roughly 30 years)

With [the above] in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse [and encourage you to visit my site and check out my track record and then subscribe. You will NOT regret it!]

*http://gainspainscapital.com/?p=1675 (To access the article please copy the URL and paste it into your browser.)

Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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