A number of developed countries have lost access to market funding over the course of the crisis, with three euro countries (Greece, Ireland and Portugal) entering EU-IMF programs in order to obtain official external funding.4 All three countries are currently under programmes monitored by the “Troika” consisting of the IMF, European Commission and the ECB.
To think about the relationship between fiscal and monetary policy, it is useful to start by considering the standard debt equation (Dornbusch 1996): b' = (r - g)*b + d where b denotes the debt-to-GDP ratio, r the real interest rate, g the growth rate of real GDP, d the primary (or non-interest) budget deficit (including unusual expenses such as bank support) as a fraction of GDP, and b' = db/dt the change of the debt-to-GDP ratio.