The planets are aligning for another round of debt monetization in Europe, backed up by the United States. Mario Draghi, the president of the European Central Bank, is reportedly looking at expanding the amount of Spanish government debt he can buy. He is also said to be considering another LTRO – Long Term Refinancing Operation, which is the mechanism the central bank uses to buy debt from private sector banks.

That Spain needs help is beyond doubt. The global bond market has been fleeing Spanish government debt as rapidly as it can, forcing yields to the 7.3% area, which is beyond the point where the Spanish government can continue to pay interest from its own revenues without severely cutting back on domestic expenditures. The same situation is playing out at the local level in Spain: Andalusia and other provinces have been besieging Madrid for help in meeting the interest burden on their own debts. There is also talk that medium to small size Spanish commercial banks are out of liquid collateral, and are unable to meet further collateral calls on the global markets.