The economic impact of the so-called sovereign debt crisis was stronger in countries with larger internal or external imbalances and was further reinforced by financial markets’ fragmentation along national lines. The crisis quickly affected banks’ funding conditions, since sovereign spreads have a significant impact on banks’ funding costs, and hence on their ability to provide credit to nonfinancial corporations.
Cross-country disparities in both the growth and the cost of loans to firms mounted during 2011; they moderated somewhat in 2012 and the first half of 2013 but they remain significant to this day.