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Spanish Bank Woes Posing Greater Risks

As problems in Spain mount, the chances of a global systemic crisis are rising, which is why you should keep these stocks on your radar screen for relative safety.

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With things relatively quiet in Greece as politicians there gear up for the upcoming election later this month, investors have turned their gaze to Spain as worries about that country took center stage. Spain is farther away from the precipice than Greece, but its problems are still acute and could very well spill over into the global financial system. Investors looking for safety might be hard-pressed to find it anywhere, but over the long haul, companies with great competitive advantages and sterling balance sheets are likely to hold up better in a crisis than more speculative names and other seemingly safe assets.

Spain's banking system is in a tough spot. The banks are quite wobbly because of the burden of bad loans, an increasingly skittish deposit base that is looking to move cash to more stable banks in Germany and elsewhere, and a bleak economic outlook. The highest-profile case has been Bankia, which Spain has now partially nationalized and is now planning to sink about EUR 19 billion into in order to keep the institution afloat. 

Bearemy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.