While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy … perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with … previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are …

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the … channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region …