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Two women withdraw money from an ATM at a branch of Spain’s La Caixa bank in Mataro on September 4, 2012.GUSTAU NACARINO/Reuters

When European Central Bank president Mario Draghi unveils his sovereign bond buying program on Thursday, he will not be thinking so much about Italy -- Europe's most indebted state -- as Spain, the country apparently next in line for an international rescue. Spain, the euro zone's fourth-largest economy, is in dire shape. It is being mauled by a double-dip recession, imminent bank bailout, yawning budget deficit and soaring jobless rate.

But things are even worse than they appear because Spain's capital flight has quietly gone from bad to dire. Fortunes are fleeing the country as the economy deteriorates and as investors and bank customers worry that Spanish banks will not survive the onslaught. They also fear that the country' use of the euro is not guaranteed. If you believe the peseta is about to make an inglorious return, you do not want your precious euros sitting in Spanish deposit accounts.

The capital flight story is nothing new, to be sure. Spain, Greece, Italy and Portugal have each suffered a slow-motion capital exodus since the debt crisis began almost three years ago. Ditto Spain. What has changed in recent months is that the capital outflows from the most distressed countries have leveled off, with one exception - Spain. The Spanish capital exodus is speeding up, representing a wholesale collapse in confidence in the country's ability to repair itself.

A note published Tuesday by Nomura strategists Jens Nordvig and Charles St.-Arnaud, in New York, tallies up the data to reveal what it calls an "extreme" capital flight. "The contrast between Italy and Spain is striking," they said. "While both countries are experiencing outflows, the sheer size of the Spanish outflows is worrisome."

Indeed, the exodus is wide and deep. Foreigners are dumping Spanish securities en masse and liquidating their banking claims in Spain. Spanish residents are yanking their bank deposits and stashing their loot in safe countries such as Germany and Britain.

Add it all up and the net outflow of private sector capital is nothing short of awesome, equivalent to about 50 per cent of Spanish gross domestic product at the end of the second quarter. That's more than three times greater than the Italian capital exodus. The withdrawal by foreigners on Spanish banking claims alone has been about €15-billion a month, equivalent to about 15 per cent of GDP.

The Nomura strategists, helpfully, put the Spanish capital exodus in historic context. During the 1997 Asian crisis, Indonesian capital outflows reached 23 per cent of GDP. The Spanish outflows are more than twice as large.

What this adds up to is a hidden currency crisis. If Spain were not in the euro, it would be devaluing its own currency like mad. In the absence of the peseta, the Eurosystem, through the so-called Target2 balances, is filling the gap left by the capital outflows. In effect, the national central banks of the strong economies (that is, the Bundesbank) are extending credit to the central banks of the weakest economies (that is, the Bank of Spain). That has left Spain's net claims within the Eurosystem at €408-billion at last count, equivalent to 39 per cent of GDP.

The upshot is that the Spanish banking system is coming under severe pressure, which in turn puts pressure on the already ailing economy. A banking rescue is already in the works and a sovereign rescue may not be far behind. "Our economics team believes that Spain will not be able to avoid a full-blown bailout,"Nomura said. "The scale of the capital fight that took place over the last few months in Spain supports this view."

At the ECB, none of this is news to Mr. Monti. The question is whether his new bond buying program will be too little, too late for ailing Spain.