A year ago, Spain's future was tied to its high risk premium, the nation understood the economic implications of diminished credibility and no financing besides taking on debt with super-high interest rates.
The spread between the German bund and Spanish treasuries reached 638 basis points and put us on the border of a full government bailout, which resulted in just a financial sector bailout that was funded by Draghi and the IMF plus Spanish taxpayers. The waters were starting to calm.
Now that the risk premium has dropped to around 300 basis points, it will struggle to go down farther even though investors have regained some confidence in Spain. The Treasury has issued some cheap debt and covered 75% of its obligations for the year already. The worst part of the crisis has passed, and there are signs of recovery, although a full recovery will take years to arrive.
