Let’s start by dismissing a common Eurocrisis fallacy that the article repeats:
Internationally he is caught between diverging pressures from Germany and France…
Germany and France are not diverging; they are converging. Hollande wanted to be the President of France and had to pander to his Socialist electorate to win the election. Politicians says lots of things during elections that they have no intention of supporting when they need to govern.
Hollande and Merkel are both members of the cult of the euro. They believe that the euro is more than just a currency, but a way to drive a closer political integration of the continent akin to a United States of Europe. When Hollande suggests that Spain seek a bailout, you can take it to the bank, just not an insolvent European one, that Merkel supports this action, too.
A Spanish bailout is going to compromise the resources of Europe and the alphabet soup of funds and institutions that will be funding it. Hollande and Merkel will have to drum up support in advance of announcing a plan at the next Euro Summit in October, so they need Rajoy to request a bailout as soon as possible.
The Germans do not want to sign a blank check, so they need more information about the financial health of the Spanish banks and regions.
Always keep in mind the bailout timeline. A lot of graft, corruption and fraud is festering within these institutions; whatever amount is announced at first will be woefully short of paying for the problem.
Germany wishes to avoid a situation where the numbers keep escalating the deeper one travels into the bailout waters due to voter backlash. Look at the Greek situation and how German voters feel about Greece today.
When Germany and France say that Spain should officially request a bailout, what they mean is that Spain will not get any money unless it agrees to Greek-style humiliation at the hands of the troika. Rajoy knows that requesting a formal bailout will spell the end of his government. He believes that they are already doing enough reforming and he wants bailout money without additional strings attached.
This argument may be true. Spain has already made deep, unpopular cuts and is poised to do more. What Rajoy does not understand is that the humiliation is what matters to the Germans. It’s part of their national psyche; if you don’t believe me, check out some German porn next time you’re at the airport.
Germany was totally destroyed at the end of World War II. Both the east and the west were rebuilt by the Russians and Americans respectively, but they had to suffer through some deprivations to obtain that help. The Germans are now repeating the cycle with their allies.
Rajoy has a better hand than one may think after examining the rapidly deteriorating Spanish financial condition. While the Spanish need to request a bailout, their Eurozone partners need them to request a bailout, too: