Capital Leaving Spain In Droves

I got some smirk comments to my tweet the other day about being short the Euro. I don’t mind the comments. I’m used to them by now. It does feel good to be on the right side of something though, notwithstanding the fear associated with being short something that is currently being held record short by traders. There is a reason for such an interest in being short the Euro however and it’s simple. There is simply a deteriorating situation in Europe that we must all be cognizant of because it will change the financial and economic landscape for years to come.

There is a debt crisis in Spain. To that, there can be no argument. Ex-premier Felipe Gonzalez, the country’s elder statesman even warned “We’re in a situation of total emergency, the worst crisis we have ever lived through” which underscores the severity of the problems facing Spaniards.

Even European Central Bank Chief Mario Draghi has warned that Europe isn’t moving fast enough to clarify their vision for the Euro.

Spaniards are moving money out of their nation's banks faster than at any point since records began and Fitch Ratings has downgraded eight regions.

It’s bad enough that Spanish banks are running out of cash and are finding it hard to recapitalize (recently Bankia had to be taken over by the government) but even the locals don’t trust their own banks with bank runs occurring all over Spain as its citizens look to get their money out before they can’t.

There has been a sharp decline in tax revenues which is starting to resemble the situation in Greece when that country started to really feel the impact from the credit markets. It’s simple. If people feel that a collapse is inevitable and if they don’t trust how their money is going to be used by the government, they are going to try to keep most of it to themselves. This is why they aren’t paying the taxman and why they chose take their money out of Spanish financial institutions.

Bank of Spain data shows that a net of €66.2bn was sent abroad last month, the most since records began in 1990. The figure compares to a €5.4bn net entry of funds during the same month a year ago