(Paul Krugman has suggested that the willingness of banks to take on high credit risks was in large part the result of the perception that the liabilities of banks were effectively government-guaranteed, and that the moral hazard created by this perception was itself the cause of grossly inadequate credit evaluation.)
Banks that had run into difficulties on account of distressed property loans in their books, say, had to be propped up by the taxpayer. The rescue sums required in countries like Ireland, Cyprus and Spain were so huge that sovereign solvency, too, began to be called into question by investors. This drove refinancing costs higher.