One of the components of MB’s ongoing COVID-19 base case, a second-round financial crisis, is a European banking bust. A part of that is loan losses for a very unprofitable sector. Another part is the so-far failed fiscal integration of the Eurozone, which presents massive fiscal stimulus risks, and bank bailout uncertainty as the COVID-19 shocks proceeds.
For instance, the erstwhile PIIGS have so far been hit by the virus the hardest. As a result, Spain, Italy, France and others have demanded “Eurobonds” or “Coronabonds” to help. But the usual austerity states of the north are still refusing.
But the southern states are not just sitting around waiting. For instance, Spain:
