Rajoy resists pressure to bow down to inevitability of bailout

Spain’s risk premium continued to ease on Wednesday on expectations the country will ask for a bailout to reduce its borrowing costs, but true to his reputation for never throwing caution to the wind, Prime Minister Mariano Rajoy has yet to make up his mind.

Attending a European People’s Party congress in Bucharest on Wednesday ahead of the European Council summit which starts on Thursday in Brussels, sources in Rajoy’s circle said the Popular Party leader insists on having guarantees that ensure the success of seeking European assistance and that any aid does not come at an unacceptable political cost.

In this he had support from French President François Hollande, who in an interview with EL PAÍS and other European media, said: “Spain should know the concrete details for accessing finance.”

"In the interests of all you can't inflict perpetual punishment on countries that have already made considerable efforts," Hollande also said

During a brief bilateral meeting with Angela Merkel in Bucharest, Rajoy urged the German leader to push ahead with setting up a European banking union as agreed at June’s European Council meeting.

Spain’s risk premium fell below 400 basis points on Wednesday after Moody’s Investors Service confirmed the country’s sovereign rating at just above junk status.

Moody’s said it believes the government will ask for a so-called Enhanced Conditions Credit Line from the permanent European Stability Mechanism rescue fund, which would trigger purchases of Spain’s sovereign debt in the secondary market by the European Central Bank.

Spain’s risk premium closed at 383 basis points, down from 426 basis points on Tuesday. The blue-chip Ibex 35 added to Tuesday’s gains, closing up 2.37 percent at 8,128.20 points.