UPDATE: Here's The Spain Story That's Causing The Market To Surge

Mariano Rajoy

Photo: flickr / Partido Popular de Cantabria

Markets are on a big tear with Spain leading the way, so it’s easy to surmise that enthusiasm over a possible Spain bailout is what’s got investors excited.And there’s an article to support exactly that.

Miles Johnson at FT reports that Spain is getting ready to bite the bullet.

A senior official within the Spanish ministry of economy said Spain did not require any money from the European Stability Mechanism, the eurozone’s state rescue fund, but would be comfortable making a request for a credit line only in order to satisfy the conditions of the ECB to begin buying bonds.

Before this can happen, there would have to be agreement over timing with Spain’s European partners – breaking with market perceptions that one of the main reasons for a delay was the reluctance of the government of Mariano Rajoy to take the politically damaging step of requesting aid. Some European officials have been frustrated by Spain’s apparent reticence to take a step that would benefit its economy.

Alright, so we’re not there yet, but the basic idea would be that Spain would submit to the “conditionality” aspect of the bailout, but not actually tap any ESM credit. Presumably that would enable the ECB to buy bonds and keep depressing yields.

Doesn’t sound like Spain is there yet, but getting closer.

(Via Lisa Pollack)

UPDATE: Bloomberg is now reporting that Germany is open to some kind of conditional credit line. It seems like this is the direction things are going. Spain doesn’t actually borrow money, but merely opens up a credit line.

This seems to be causing a nice market pop in the US, and Spain itself is now up 2.2%, with financials leading the way.

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