The Trader has covered the Spanish economic problems over the past months. With the Greek mess soon to be “resolved”, focus should be shifting towards the Iberian Peninsula and more specifically Spain. Spain is up for more pain ahead. By Marshall Auerback via NEP.

Another day and the markets remain fixated on whether Greece comes to a “voluntary” arrangement with its creditors. The key word is “voluntary” because the myth of “voluntary compliance has to be sustained so that those deadly credit default swaps avoid being triggered.

But let’s face it: Greece is a pimple. If the rest of the euro zone could cut it lose with a minimum of systemic risk, Athens would have long gone the way of Troy. The real issue is whether the credit default swaps trigger such a huge mess with the counterparties that it creates renewed systemic stress which more than offsets the benefits to the holders of the CDSs.

The more interesting question is: suppose Greece finally does get a deal? I realize everybody says it is a “one-off”, but do you really think the Irish, Portuguese, or even the Spanish and Italians will go along with that, particularly if (as is likely) they continue to experience double digit unemployment and minimal growth? (Full reading here.)