It is these two problems, which are obviously interlinked, and which have both been growing in the course of the past year, that have led to the market’s reluctance to provide continuing funding at reasonable rates of interest.
No less important is a stricter supervisory regime like the one which Europe is looking to achieve by establishing the banking union. But even a credible no-bailout regime will only have the intended disciplining effect when doubts begin to emerge over a country’s fiscal soundness.