Here’s what we do know: the Spanish economy is imploding, government revenues are falling despite higher taxes, and the bank run continues. Spain is running out of runway, and something will have to happen.
Europe has told Spain that, if she applies for assistance from the Eurogroup and agrees to the Troika’s terms, the ESM will lend directly, and the ECB will buy Spanish bonds in the secondary market. This would appear to be the obvious next step.
However, Spain has not yet applied for assistance, and has given three reasons for not applying. First, she says she doesn’t need the money, which is a blatant but understandable lie. Second, she says that she won’t apply until the Troika’s terms are known, and the ECB is more explicit about the size of its intervention in the bond market. Rajoy doesn’t want Spain to be living on an IV drip like Ireland and Portugal, and who can blame him? Thirdly, Spain will not apply for aid unless she can be assured of receiving it. That’s the really scary part.
According to Reuters: