Mario Draghi is waiting for Spain to get back to him on whetherhis plan to save the euro is needed.

One month after the European Central Bank president unveiled anunprecedented bond purchase program to rescue Europe's embattledsouthern fringe, Spanish Prime Minister Mariano Rajoy is showingreluctance to ask for the aid he pushed for with Italy on concernabout the terms attached to it. As ECB policy makers meet inSlovenia today, Spanish two-year note yields are more than 50 basispoints higher than the five-month low touched on Sept. 7, the dayfollowing their last decision.

“We're back at this game of brinkmanship between the ECB andgovernments again, and it's a case of who makes some concessionsfirst,” said Nick Matthews, senior European economist at NomuraInternational Plc in London. “The markets will continue to play asignificant role here and Draghi needs them to turn up thepressure.”

Spanish bonds extended losses today after an auction of two-,three- and five-year securities failed to exceed the maximum targetof 4 billion euros ($5.2 billion) and the benchmark three-yearyield rose. While Finance Minister Luis De Guindos has saidofficials are still considering whether they actually need ECBhelp, Catalan President Artur Mas urged Rajoy to ask for a bailoutas he rejected the deficit limits for his region next year. Spaincan't overcome its economic crisis without help, Mas said in thestatement published yesterday.

Italian Prime Minister Mario Monti cautioned last week that aidshouldn't hinge on more conditions than leaders already signed upto and the International Monetary Fund shouldn't need to policeit.

European stocks relinquished gains as investors awaited the ECBpolicy meeting. The Stoxx Europe 600 Index rose 0.1 percent to271.67 at 12 p.m. in London, after earlier climbing as much as 0.5percent. The euro rose 0.5 percent to $1.2951.

“What people tend to forget is that the ECB's bond plan is onlycomplementing the implementation of financing help agreed by thegovernments,” said Athanasios Orphanides, who was an ECB councilmember until May and now teaches at the MIT Sloan School ofManagement in Cambridge, Massachusetts. “So if Prime MinistersRajoy and Monti are not happy about conditionality or IMFinvolvement then they should take it up with their fellow leadersand not complain about the ECB.”

Monthly Meeting

Such considerations may color today's gathering of ECB officialsin Ljubljana for their monthly policy decision. Economists expectthem to keep the key interest rate at a record low of 0.75 percent,according to the median forecast of 52 economist forecasts.

Bank of Spain Governor Luis Maria Linde won't attend the meetingbecause he's appearing at a parliamentary budget committee inMadrid today. Chief Economist Jose Luis Malo de Molina will standin for Linde, said a Bank of Spain spokesman who asked not to benamed in line with policy.

Linde told Spanish lawmakers that there is a “risk of missing”the government's deficit goal for this year, based on budget dataso far this year.

The ECB holds its Governing Council meeting away from Frankfurttwice a year. It will release its decision at 1.45 p.m. local time,and Draghi will brief reporters at a press conference 45 minuteslater. The Bank of England today held its bond-purchase target at375 billion pounds ($603 billion) and kept its rate at 0.5percent.

Investors will watch Draghi's presentation today for clues onprogress since he unveiled an unlimited government bond- purchaseplan which would see the ECB buying maturities of up to three yearsin the secondary market. The ECB would act if countries applied foraid to the euro region's bailout fund, the European StabilityMechanism, which would then purchase government bonds in theprimary market.

While officials wait for any request to come through, Draghi hassought to sell the plan in Germany, whose Bundesbank President JensWeidmann was the sole dissenter on the ECB Governing Council. In abid to soothe concerns in Europe's largest economy after a mediaoutcry, Draghi pledged to German lawmakers on Sept. 25 that anybond buying must be “accompanied by reforms from governments thataddress deep-rooted issues.”

Austerity Package

Spain has yet to signal if it will accept such terms. De Guindossaid Oct. 1 that officials are studying the ECB plan and will makethe “best decision for the interests of the Spanish economy.” Thatfollowed the unveiling of a fifth austerity package in nine months.The government announced plans to borrow 207.2 billion euros nextyear, which would increase its debt load to 90.5 percent of grossdomestic product.

“The fears of the Bundesbank now seem to be coming true, thatthe governments are finding it very difficult to fulfill theconditions so that the ECB can act,” said Christoph Kind, head ofasset allocation at Frankfurt Trust, who helps manage about $20billion. “I think the ECB had imagined things would rundifferently.”

While Spain seeks the lightest possible terms from creditorgovernments and the ECB as a reward for austerity measures alreadyimplemented, it's unlikely that Draghi will agree to a no-stringsattached bond purchases, said Laurent Fransolet, head ofinterest-rate strategy at Barclays Plc in London.

“If you don't have conditionality, you don't have a deal,” hesaid. “It's very unlikely that the ECB will back down onconditionality. The markets know that, they also know that thiswon't happen overnight, and that a lot of sequencing isinvolved.”

The Spanish 10-year yield reached a euro-era record 7.75 percenton July 25, before Draghi pledged the next day to do “whatever ittakes” to safeguard the monetary union. It was at 5.85 percenttoday. Two-year notes were at 3.28 percent, up from as low as 2.71percent on Sept. 7.

Bond yields are unlikely to surge because the ECB's plan hasquelled investor concern for now, Fransolet said. “People are notgoing to short Spain if the ECB is only a phone call away.”

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