The end game is unfortunately unfolding as Spanish bank losses become Spanish govt losses.

Deposit insurance is only credible at the ‘Federal’ level, not the ‘State’ level.

If the ECB had to write the check the issue would be inflation, but not solvency.

The euro govts can no more fund bank losses than the US States could cover bank losses.

And the euro zone response of spending cuts and tax increases only makes matters worse.

From inception, the euro system has been exactly this kind of accident waiting to happen.

CajaSur Seizure Marks Change for Spain’s Ailing Banks