Nevertheless, a number of studies have provided increasing evidence that interest rate spreads reflect a differentiation of fiscal policies across countries. Recent reactions by rating agencies also point to renewed emphasis on this issue. Whether these reactions are sufficiently strong is a different matter.
It has been argued that the EU fiscal framework in the past might have contributed to high confidence in the sustainability of fiscal policies and thus to low spreads. IV. Financial markets, monetary policy and fiscal discipline  The final question I would like to touch upon is this: how could financial markets help encourage fiscal discipline?