“The parallels between Spain and Ireland are striking. Just like Ireland, Spain had a credit boom financed mostly with external debt, which meant that the balance sheets of their banks are now stuffed with bad debts as asset values collapse. Both governments have now injected billions into these ailing banks, to the detriment of their respective debt profiles.
“The Spanish Prime Minister has become preoccupied with creating market confidence, as was the Irish Prime Minister in the run up to the EU/IMF bailout. Confidence talk may buy some time, but ultimately it doesn’t make the problem go away. The accent heard today in Madrid has a distinct Irish lilt to it. The script is the same. First, deny the problem. Second, underplay its size. Third, look for external help to solve it once you have promised what you cannot deliver.”