The government wants to know where the risk premium will settle if Spain asks for a bailout. This is what Rajoy wants to know, and the Prime Minister directed the question to the ECB. It's likely that Draghi is not ready to reply because this is privately held information.
Finding out this information would have been much easier if six months ago the Cabinet had played its cards right and not lost representation at the ECB when González Páramo left. He was the last ECB representative. Since the risk premium is a critical piece of data, because as soon as the ECB lowers Spain's risk premium, it would be more advantageous for Spain to ask for a bailout.
Rajoy is in a dilemma, and it grows sharper over time as events move along toward a recovery. First, the ECB announced that it would buy sovereign debt from Spain. Then, Germany's Constitutional Court announced yesterday that it will allow Chancellor Angela Merkel to back euro zone countries with the MEDE, a fund that operates to insure the euro. Lastly, the Eurogroup will meet tomorrow to talk about bailout conditions.
Still, the motivation to ask for a bailout is still strong in Spain. Rajoy could believe that markets will continue to thrive as they have been in the past few days and fail to ask for a bailout -- and face the costs that this would bring. The risk of waiting longer is high, and the political and social costs could be higher yet. Markets are red hot, but they could extinguish, and then the risk premium would shoot up quickly and introduce a greater instability into Spain. At that point, the nation would have to ask for a bailout and pay an even higher interest rate to get it.
The question is: does Spain have enough liquidity to keep putting off asking for a bailout?
