Weathering the Storm

CHAPTER 5

Supporting Sovereigns Under Financial Stress

Chapters 2 and 3 outline the strong deterioration of financing conditions in certain countries. Indeed, the yields requested by the markets for Greek government bonds increased from less than 5 percent in 2009 to over 12 percent in Spring 2010 (Figure 2.5). This deterioration in borrowing costs led to a situation whereby public finances would have become unsustainable had they relied on financial markets for funding. In this context, the Greek government turned to its European partners for financial support. While the Greek case was amongst those with greatest impact, particularly given Greece’s status as a euro area member, it was not the first time an EU Member State asked for external ...