Battle of the Euro will be fought in Spain Some think that Greece has ground Europe and the world market to a halt. This is only partially true. The problem of Europe is the overlevered banks of Spain about 700 billion in totall debt that 200 billion is being held by German banks. A crack in Spain will light fire crackers all over Europe and the whole continent will go up in flames. The US dealt with the problem of the overlevered banks with the TARP, i.e., the printing presses. The Europeans are still twiddling their thumbs beating around the bush and not facing the problem head on. Merkel, the child of East German Apparachik has a serious problem understanding how market forces in the West work. Markets don't wait, once they smell blood, they go for the kill. Spanish bonds the other day, hit 6.65% yield while the German Bund yields only 1.57% This is a warning that unless Spanish banks are recapitalized soon Spain will be unable to go to the markets to borrow money and will be forced to seek help the same way Greece did. Germany objects to Eurobonds. The ECB announced the other day that it will not recapitalized the Spanish banks. Greece in the meantime seems to present less risk leaving the Euro and the pro-European forces are gaining momentum and will probably form a pro-European coalition governmen on June 18. The real problem however will be Spain and its overlevered banks. And the battle whether Germany will blink and go for a Eurobond to resolve the crisis will be fought in the plains of Spain.