Economic Outlook: Spain seeking relief Spanish President Mariano Rajoy. UPI/Brian Kersey Spanish Prime Minister Mariano Rajoy may have lost the battle and won the war in a gambit over how international aid is handled. The European Central Bank in recent weeks said it would start buying short-term bonds from countries such as Spain and Italy to help them. At the same time Spanish banks were predicted to require around $130 billion in financial aid, which the international community set aside for Spain and the ECB pegged their bond-buying to the European Stability Mechanism, which meant Spain had to first comply with ESM terms before it could expect the monetary region's central bank would advantageously start buying Spanish bonds. Rajoy needed to insist, as best he could, that he would not add to Spanish debt by accepting ESM assistance, preferring Spain allow aid to go directly to its troubled banks. By avoiding use of the government as the middleman in the deal -- in effect signing for a loan that was going to Spain's banks, anyway -- the government would not add to its debt load. On Saturday, an independent audit of Spain's banks found that half of the 14 banks put through financial stress tests would not need any assistance after all. The remaining seven would require about $60 billion. In a sense, Rajoy caught a break. He could now apply for international help for about half the expected price tag and expect the ECB to step up to the plate. The problem is, the banks will have their solvency restored only to be faced with the same bleak economy that set this off in the first place. With huge numbers of failed mortgages on their books that were the the catalyst for the economic tailspin, the country is now faced with nearly 25 percent unemployment. And Rajoy, although with less vigor than expected, will still have to put together a budget that meets the European Union's standards. In addition, budget targets that Spain is agreeing to are already on the verge of science fiction. Spain, in effect, could be chasing its own tail, cutting investments in its economy, while expecting its debt will shrink as a result. The way that works is this: A government lowers its debt to economic production ratio to the point that that investors understand the country's bonds are a sound investment. If that's the theory, how come it appears to work the other way in the United States, where a one-time lowering of its unblemished credit rating sent its bond yields lower? In a simple loop, the lower credit rating caused at least mild panic in the marketplace and investors head for safe ground during a crisis. What investors count on in the real world is a diverse economy. What picks up U.S. bonds isn't a credit score, it's cars, planes, computers, clothing, agriculture, hospitals and restaurants. Diversity makes the United States the safest bet out there. What preceded Spain's demise was a house of cards property market and not enough diversity to back it up. In international markets the Nikkei 225 index in Japan shed 0.83 percent and the Shanghai composite index in rose 1.45 China percent. The Hang Seng index in Hong Kong gained 0.38 percent and the Sensex in India added 0.33 percent. The S&P/ASX 200 in Australia was flat, rising 0.04 percent. In midday trading in Europe, the FTSE 100 index in Britain gained 1.06 percent while the DAX 30 in Germany rose 1.2 percent. The CAC 40 in France climbed 1.54 percent and the Stoxx Europe 600 gained 0.96 percent.