There's Another Huge Government Debt Issue In Europe, And Even Germany Is In Trouble

You've probably seen scattered headlines in recent months about some credit rater downgrading a region of Spain. What's the real story there?

While most of the attention in Europe has focused on the sovereign debt issue, there's been far less paid to local government debt.

Morgan Stanley's Daniele Antonucci has made this the focus of a new report.

Here's what's interesting: The two countries with potentially the biggest local debt issues are Spain and... Germany.

These two charts tell that story.

And on the debt side of the ledger:

Note that German's non-central debt it the biggest by far. Greece has virtually none, and in fact all of the PIIGS -- Spain excepted -- are under-represented on the left end of the chart.

Antonucci believes that in most cases the central government would end up having to bail out the local governments, were it to come to that.

Thus Antonucci believes that there's a considerable chance that the central banks will ultimately need to tap the markets for more funding than what's currently estimated.

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