Angela Merkel doesn't want to have to ask the German parliament permission to help Spain, and Rajoy doesn't want to ask for a bailout.
Spain's second in command, Sáenz de Santamaría, insisted yesterday that a decision about whether Spain would ask for a bailout or not would not be made until "the conditions are well clarified." An alliance of mutually interested parties has risen to try and get Spain to get through the roughest patch of the crisis without asking the EU for help.
Meanwhile, Merkel is trying to keep Spain's problems from creating unrest in German government and with the German population. For his part, Rajoy got Spain as far as the Galicia elections without having to ask for a bailout and he also avoided the major expense that a bailout would cost the executive and the Peoples' Party. Opposing points of view characterize Europe currently. Some are pressuring Spain to ask for aid and thereby nix doubts. Others, including Rajoy and Merkel, want to keep postponing a bailout.
The key issue is how much longer the current stability can last and also whether the risk premium will remain at current levels (around 400 basis points). Even considering the confidence of an ally as strong as Germany, the Spanish treasury still needs to issue 60 billion euros in debt between now and year end and also needs to service 20 billion euros in debt in January 2013.
The only way to sidestep a bailout is to make sure Spain can meet its deficit objective and complete pending reforms -- particularly in the public sector. This is the only alternative left if the markets are to regain their confidence.
