Spain is the “big elephant” in the European debt crisis

Spain is the “big elephant” in the European debt crisis because there may not be enough money to bail out the Iberian nation, saidNouriel Roubini, the New York University professor who predicted the global financial crisis.

Investor concern has shifted to Spain and Portugal since yesterday, when European governments sought to bolster the euro by giving Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals that would have forced bondholders to bear some costs of future bailouts.

“It is quite likely that Portugal” will be next in line for a financial assistance, Roubini said today in Prague at a conference of chief executive officers sponsored by ING Groep NV. “The big elephant in the room is not Portugal but, of course, it’s Spain. There is not enough official money to bail out Spain if trouble occurs.”

HSBC Holdings Plc estimates Spain may need 351 billion euros over three years. The European Union may be able to deploy only 255 billion euros of the 440 billion-euro European Financial Stability Facility, according to Nomura International Plc. That’s because the bailout fund is financed by bonds, and governments agreed to set aside cash and link lending to the creditworthiness of donors to secure a AAA rating.

The cost of insuring the debt of Spain, which has the fourth-largest euro-region economy, and Portugal soared to record-high levels today, according to CMA prices for credit- default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524.

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