The turmoil in May not only led to very high spreads on Greek paper, but also affected other countries’ sovereign debt markets, led to extremely volatile equity and foreign exchange markets and brought about a new freeze in interbank trading as banks again became reluctant to lend each other in a context of uncertainties regarding exposure to the countries concerned.
Therefore, the Governing Council of the Eurosystem decided on a package of measures. First, a programme to intervene on the secondary markets for private and public debt securities was set up in order to restore the smooth functioning of securities markets, a key link in the monetary transmission chain.