We have to consider sovereign risk as the main overarching risk in Germany and Europe as a whole − all the more so, since there is a strong link between sovereign risk and asset quality and the funding risk of the banking systems concerned.
Three weeks ago, the European Council agreed an important and comprehensive package of measures to tackle the current European debt crisis and obviate future strains. The package includes several elements. The most prominent of these measures is the launch of a permanent Financial Stability Mechanism which will replace the temporary mechanism initiated last year.