A sense that countries in trouble would eventually be bailed out despite Treaty prohibitions may also have been at work in keeping debt yields low in the past: but that belief too has been eroded by the market’s experience with the Greek PSI debt exchange.
Of course, by piling up debt in many euro area countries (some of which were already high; some not so high), the fiscal and banking policy responses to the crash of 2008–9 (countercyclical fiscal policy and the assumption of the obligations of failing banks) have contributed to moving countries from safety into the risk zone where the good equilibrium – low interest rates, low perceived default risk, could flip, and has flipped, into the bad equilibrium of high interest rates and less certainty.