For Spain's Rajoy it's no bond buying today but certainly by the end of 2012

10/03/2012 10:19 pm EST


Jim Jubak

Founder and Editor,

Yesterday Spanish Prime Minister Mariano Rajoy rattled financial markets, especially European financial markets, when he told reporters that no formal request for bond-buying support from the European Stability Mechanism and the European Central Bank was “imminent.”

Today the markets are trying to figure out exactly what that might mean in terms of a timetable for submitting a formal request.

The best guess at this point is that Rajoy is looking to put off the request until after Spanish regional elections in October and November. A formal request for bond-buying aid would have to include a program of conditions that Spain would have to meet on economic reforms and its budget deficit. And the idea of anything that even suggested putting Spain on a path to Greek-style supervision by the International Monetary Fund and the European Central Bank is deeply unpopular in Spain. It’s only logical to think that Rajoy would like to put off a formal request until after regional elections where his party faces major challenges.

But that doesn’t mean that Rajoy can put off a formal request for very long. By the Spanish government’s own figures, Spain will need to borrow 207 billion euros in the financial markets in 2013. There’s simply no way that government will be able to raise that sum without bond buying by the European Stability Mechanism and the European Central Bank.

So yes, no formal request is imminent if by “imminent” you mean “this month.” But if by “imminent” you mean by the end of 2012, then no, Rajoy “misspoke” yesterday and a formal request is indeed “imminent.”

Frankly, Rajoy’s remarks remind me of this exchange between Alice and Humpty Dumpty in Lewis Carroll’s Through the Looking Glass:  "When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less." ?"The question is," said Alice, "whether you can make words mean so many different things." ?"The question is," said Humpty Dumpty, "which is to be master - - that's all."
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