Barclays Capital analysts have been less sanguine about the risks posed to Spain by its banks. In a report published in November, Barclays put Spain in a basket with Ireland and the Netherlands as countries in which the banks represented a "high" risk to the stability of the sovereign.
Referring to a "funding hump", this month is likely to be crucial for alleviating investor concerns in the Spanish banking system, which must refinance about €15bn of debt.
The signs so far appear to be good. Santander, Spain's largest lender and the one with the largest direct exposure to Portugal, already has about one-third of the €30bn of debt it must raise in 2011 to fund itself for the year.
While Santander could still take substantial losses on its Portuguese exposure, these are far from life threatening, and it would seem that the market's lack of concern appears to be justified at the moment.
Source: The Telegraph