Having mentioned those two contradictory tendencies, I have to add that it is quite difficult to predict when the former tendency will be replaced by the latter. What is certain is that expectations change in a non-linear fashion. That is why the principles of the authorities’ behavior have to be clear.
However, the disappearance of the exchange risk, the harmonisation of market practices, the redenomination of government debt into euro at the beginning of the third stage of EMU and important issues of government bonds in euro have contributed greatly to accelerate the process. Yet this has not led to the disappearance of interest rate spreads between countries.