After Greece's default a month ago people are looking around to find the next default candidate.
Which sovereign might it be, and why?
My money is on Spain.
Here's why: http://www.munknee.com/2012/04/graham-s ... heres-why/
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.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).
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)