“If Greece was living beyond its means, Spain’s problem stems from a property boom that followed its entry to the EU. Northern Europeans escaping to the Mediterranean beaches fed an orgy of hotel and apartment building. Many of those developments are unfinished skeletons or on sale at foreclosure prices. The banks are loaded up with the consequences of that boom and bust.
Pierpaolo Barbieri, Ernest May Fellow at the Harvard Kennedy School’s Belfer Center, says that ‘big, international banks like Santander and BVA are well diversified. Of the others, quite a few need capital — but how much? That’s the unknown and Bankia has undermined faith in financial reporting.’”