It was no accident that on Friday the risk premium started to rise again and yesterday it topped 400 basis points for the first time in weeks. The European Council met on Thursday and Friday of last week without making any concrete decisions about bank reforms. But the meeting did make it very clear that Germany is not ready to approve a Spain bailout if it entails giving the country a line of credit.
The markets have started to show their impatience with the lack of decisions, cognizant of the fact that heavy market pressure will speed Spain?s request for a bailout. Rajoy needs to admit that he is not relying on Merkel and that he can?t put off asking for aid forever, especially when the markets are demanding an answer about Spain?s bailout plans.
