The consequences of Greece and Spain collapsing in tandem
The following is a brief extract, but the entire article is worth reading:
The numbers do look dire.
Stephane Deo, an economist at UBS, estimates that the cost of a Greek exit to European taxpayers would be 225 billion euros, assuming Greece defaulted on the money it now owes to European public institutions.
But, he says, the real fear is that while that was happening, the slow-motion collapse of Spanish banks from toxic real estate loans could suddenly turn into a fast-moving bank run, as depositors pulled out their money.
With Spanish banks now holding deposits of 2.3 trillion euros, such a loss of confidence could be disastrous for Spain and for the highly interconnected global banking system. The financial world's assumption lately has been that it is sufficiently prepared to absorb the consequences of a Greek withdrawal from the euro. But if a Spanish banking collapse were factored in, Europe's long-dreaded "Lehman moment" might finally arrive. "The scale is just so much bigger, when you talk about Spain," Deo said.