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The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined At the Hip
Author:
Mr. Damiano Sandri
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Mr. Ashoka Mody null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 269
Language:
English
Publication Date:
01 Nov 2011
DOI:
https://doi.org/10.5089/9781463925215.001
ISBN:
9781463925215
ISSN:
1018-5941
Pages:
33
Keywords:
WP; sovereign spread; financial crisis; sovereign bond; banking sector; sovereign spreads; financial sector; stock market; eurozone; Bear Stearns; Anglo Irish; eurozone sovereign bond bond market; Eurozone crisis; eurozone country; flight to quality; eurozone economy; Anglo nationalization; Sovereign bonds; Stocks; Global; Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We use the rise and dispersion of sovereign spreads to tell the story of the emergence and escalation of financial tensions within the eurozone. This process evolved through three stages. Following the onset of the Subprime crisis in July 2007, spreads rose but mainly due to common global factors. The rescue of Bear Stearns in March 2008 marked the start of a distinctively European banking crisis. During this key phase, sovereign spreads tended to rise with the growing demand for support by weakening domestic financial sectors, especially in countries with lower growth prospects and higher debt burdens. As the constraint of continued fiscal commitments became clearer, and coinciding with the nationalization of Anglo Irish in January 2009, the separation between the sovereign and the financial sector disappeared.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund