Spain will be centre of ‘eurocrisis’ action this summer. If the European Central Bank can pull off a smooth refinancing, the crisis will finally be put to rest. If not, the next two years at least will continue to be rocky. Watch the strength of the yen and euro for signals, advises Clem Chambers, CEO of ADVFN.com, Europe’s leading stocks and shares information site and author of titles including ‘A Beginner’s Guide To Value Investing’.For Europe, as Yogi Beera, the famous American baseball coach said, its “déjà vu all over again”.Now the name in the frame is Spain.The economic numbers for Spain are not as horrendous as those of Greece. However, the Spanish banking system is loaded up to its ears in real estate debts that will never be repaid. Consequentially, Spanish banks are a default waiting to happen. Spain has had massive twin deficits. Four years into the credit crunch it is trying to get its fiscal deficit down to five percent of GDP.Meanwhile, the country has horrific unemployment of over 20 percent whilst over 12 percent of the working population are civil servants.Leading up to the crisis, the country had in effect been financing itself from a runaway property boom, a key European trick to pump huge taxation flows into government coffers. This ‘wheeze’ makes the population feel rich and happy so is great for short-term business, both fiscal and political. In the end however, like all credit bubbles, it has to implode.While the property boom is ‘on’ the country feels rich and has cheap credit. The population buy goods, but because the country has not made the money by industry, imports are the only way to quench the credit-fuelled thirst. Import levels explode and create a giant trade imbalance. Spain’s hit ten percent of GDP at the height of their boom.So rather than get rich from a property boom, the new money flows abroad to the developing world which actually makes things, leaving the victim of the property boom in debt.Spain has thus been gutted.The short-term windfall of a property boom also supports restrictive labour policies, which in turn make local industry almost impossible to grow. Even while money runs freely, no one in their right mind would create industrial jobs which can then be got rid of later. Like desert rain, the money quickly runs away.So boom leads to little real growth, yet governments flush with cash bloat the public sector. Tramways are built, sculptures are erected, roads to nowhere are laid. Public sector jobs explode, civil servants get better conditions, in Spain’s case yet shorter “working” hours, votes are generally bought and promised from the influx of new cash.GDP appears to grow because GDP contains government spending growth. The expansion of the public sector makes it look like there is growth, but the economy isn’t growing at all: or rather the productive part hasn’t grown.Meanwhile, for all the boom-time money, real sustainable economic growth remains dormant.When the property bubble bursts, tax income collapses, government deficits explode, banks over-burdened with bad property loans collapse. Government debt is hard to finance, interest rates rise. This is where Spain finds itself today.Europe has forestalled a broad economic collapse across its many overstretched states by playing for time. The officials have come up with a method to hold the currency and the block together. The European Central Bank (ECB) buys bank bonds and government bonds. The ECB swaps their good money, for bad money.If a country is shaky, it buys that country’s bonds and keeps interest from going off the dial. This level is five percent to six percent.If a country’s banks become shaky, the ECB buys their bonds - which they can invent by swapping with other ‘dodgy’ banks. In exchange, banks buy government bonds to fund the deficits of their country, on the back of the credit worthiness of the whole of Europe. It’s a three ringed circus, ECB, European state treasuries and the banks.This creditworthiness is in effect underwritten by the credit-worthiness of less- leveraged European countries like Germany, Holland and, arguably, France.The idea is that as a whole Europe isn’t particularly broke, it is only certain states that are in trouble. No one would worry too much if California was broke; it has the whole of the US behind it. Why then should Greece throw the whole of the euro in doubt?As such, the ECB and Europe is trying to act as if it is as federal as the US. It is acting as ‘the United States of Europe’, even though the treaties are not in place to do so.The frontline of this process is now Spain. The key question is ‘does Europe have the will and ability to continue to process and bail out Spain?’ To bail out Spain and consequentially Italy will take a major European monetary shift, one undoubtedly involving broad inflation.The ECB will simply have to re-inflate to rebase the economies of Europe into some kind of equilibrium.Spain will be centre of the action during this spring and summer. It will be down to the ECB to refinance and bail it. If the ECB pulls this off smoothly, the euro crisis will really be put to rest.If however, we have a re-run of last year’s chaos, not only will 2012 be rough, so will 2013 and 2014. If the euro dam breaks then the economic consequences will be nothing short of titanic.How will you know what the likely outcome will be? Will it be rescue or disaster?There are two main dials to watch. The yen and the strength of the euro.A strong yen generally means people are running from something scary. Even though Japan may try to weaken the yen further, yen rallies mean fear is in the market and it is highly likely that the fear will be Euro-based.The stronger the euro, the more likely something bad will happen to European monetary union.This might seem wrong, but unless Germany leaves the euro, in any euro emergency it is the basket case countries that would be expelled. This makes the euro more like the D-Mark and hence stronger. If the weak countries, who need to escape back to their old currencies leave, the Euro will rise. If they stay, there will be a lot more money printing in Europe and the euro will weaken.A yen and euro rally would be a bad omen for Europe, whilst a falling euro and yen would mean the euro storm is passing.Visit ADVFN.com for free, real-time stock pricesCheck out Clem’s latest news at www.clemchambers.comFollow Clem on Twitter: @ClemChambers