Why Crisis in Spain This Week Is More Important Than Greece

TODAY'S biggest news is the word that the European Central Bank is intervening in European debt markets in force, buying up Spanish- and Italian-government debt. The ECB spent last week expressing reluctance to take this step, but without it, the euro crisis threatened to spin irretrievably out of control. What are these purchases all about, and will they work?

The push for a referendum on independence for Catalonia faltered last week as the largest pro-independence party lost seats in the Spanish province’s regional assembly. Catalonia is the most economically productive part of Spain, and has always valued its autonomy, but austerity and high unemployment have reignited a push for full-fledged independence.  

  I want to issue a major warning to investors: the EU Crisis is going to get worse in the coming months. I realize that most investors and analysts believe that the EU Crisis is over. Then think that because the S&P 500 is closing in on its all-time highs that things are fine in the system.They are wrong.

Yields on 30-year and 5-year bonds in Spain hit a euro-era record on Friday as the Valencia region of Spain filed for financial assistance. Bloomberg reports Spain Bonds Slide as Valencia Aid Request Deepens Crisis

For some time during and after the financial crisis, it was fashionable to point to Canada as a paragon of fiscal and regulatory prudence. In the years leading up to the crisis, the Canadian government ran budget surpluses, which enabled it to stimulate the economy without creating huge debt loads we now see in Greece and Spain. In addition, the Canadian banking system faced stricter capital requirements and were more risk-averse than their American and European counterparts. Perhaps most important, Canada avoided the sort of real estate bubbles seen in the U.S.

An op-ed in today's Financial Times by Allianz chief economist Michael Heise has everyone chattering about "crexit."

By Bill Luby: Two years ago today, in Spain rallies, I posted a chart of the Spanish ETF, EWP, that showed it had rallied off of a bottom and looked like it was poised for a bullish breakout.In July 2010, I saw Spain as the keystone in the euro zone puzzle: