The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined at the Hip

34 Pages Posted: 20 Dec 2011

See all articles by Ashoka Mody

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Damiano Sandri

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: November 2011

Abstract

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.

Keywords: Banks, Cross country analysis, Economic growth, Economic models, Europe, Financial crisis, Financial sector, Global competitiveness, Sovereign debt

Suggested Citation

Mody, Ashoka and Sandri, Damiano, The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined at the Hip (November 2011). IMF Working Papers, Vol. , pp. 1-33, 2011. Available at SSRN: https://ssrn.com/abstract=1974837

Ashoka Mody (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

Damiano Sandri

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
269
Abstract Views
1,191
rank
121,397
PlumX Metrics