Countries that lose market confidence become progressively dependent on domestic sources of funding, more prone to capital outflows and less responsive to monetary policy. The divergence in bank funding conditions at national level in turn gives rise to cross-country differences in lending conditions.
Has the euro area now become safer? I expect economic growth to develop along favourable lines in the coming months. The low oil price and neutral fiscal stance will help, financial markets are more confident, the exchange rate of the euro will support exports and structural economic reforms are having positive effects in some countries.