Thanks to an elimination of exchange-rate risk and a decline in inflation differentials, peripheral countries – such as Greece, Ireland, Portugal, and Spain – gained access to considerable financial resources from the region at substantially lower interest rates than before. In real terms, their interest rates were lower than those of the core countries.
Cheap external finance enabled the peripheral countries to swell their net external debt (Chart 3).11 Major financiers to the peripheral countries were largely concentrated in the core countries (with current account surpluses) and France.