The initial tremors of the euro area crisis occurred in Greece in the fall of 2009 following news that the country’s fiscal deficit would be much higher than had been expected by the markets. The country suddenly found itself at the centre of a sovereign debt storm, and interest-rate spreads began a relentless upward climb.
Fourth, as it is being widely recognised that analysis through a micro-prudential lens makes policymakers prone to ignoring the implications for systemic stability of financial market imperfections, including those stemming from information frictions, moral hazard implicit in too-big-to-fail firms outside regulatory purview and the negative externalities when firms too-interconnected-to-fail failed.