We analyse the poisonous interaction between bank rescues, financial fragility and sovereign debt discounts. In our … sovereign debt discount. We introduce long term government debt, which gives rise to the possibility of capital losses on bank … intermediaries causes bond prices to drop triggering capital losses at the bank under intervention. This mechanism shows the limits …

whether government subsidies to firms affect quantity and quality of bank lending. We combine recipient firms under the … to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more … subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn …