But irrespective of its initial impulse, it quickly became a two-way loop through the “bank-sovereign” nexus: banks remained dependent on fiscal authorities for solvency assistance, and the financial obligations vis-à-vis banks that this responsibility created on the part of some governments with weak fundamentals further undermined their credit standing.
(business cycle correlations)  0.1 0  1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 20052000 2001 2002 2003 2004 2005 2006 2007 2008 Notes to Figure 3: •  The rolling business cycle correlations are constructed by calculating the pairwise correlation coefficients between all euro area countries for the various 4-year periods (1997-2000, 1998-2001, etc).