Since the crisis began, everyone to some extent has been forced to make a crash course, but if economy, at least in economic terms. And surely one of the most we’ve heard and talked about is the risk premium, but often mislesds many people with the exact definition of what this term means. The risk premium (also known technically called differential debt) is a term that defines the economic world to perfection one of the most crucial basic laws of economics: a higher risk, higher expected profit. However, when we talk about the risk premium must think we are referring to a term related to a type of investment vetoed most people and reserved exclusively to those who call institutional investors (mainly banks and large investment funds) who are the main buyers of government debt of states, which is the element on which the risk premium is set. The aforementioned risk premium is, in essence, price (or more properly charge) the Spanish state, in our case, investors must pay to buy government debt auctions material periodically. And this price is always referenced to the pattern marked by Germany to be considered the most stable and reliable country in Europe. Thus if we say that Spain’s risk premium is 400 basis points, what we are really saying is that investors who buy Spanish public debt will do so with a premium of 4% above the percentage paid by German bund (name of government bond), or what is the same, in Spain borrowing in international markets will find 4% more expensive than in Germany. Technically the risk premium does is measure the confidence of investors in the economy of a country. So when the premium goes up, it means that investor confidence in the country to repay the money they have left (this is the public debt) is less. Therefore, when the higher country risk, the higher the risk premium, because investors require extra return (interest) to buy its debt. And in the case of Spain , we have been seeing in recent times (although lately it has slowed down a bit ) , a continued rise in the risk premium , therefore, of course, the increasing lack of investor confidence on the ability to pay Spanish debt as its economy grows very little or even decreases, there is a very high unemployment rate , of having many people without cause and without consuming , behaving , all that is least generate revenue by way of taxes and that, therefore , the state has less money to deal with their debts. Ramon Font Lawyer