The Future of the Eurozone

In the few days prior to 8 May 2010, European country leaders noticed a rapid loss of market confidence in government bonds. This loss of confidence not only affected bonds issued by the Greek government but also government bonds of several other member countries in the eurozone. The default insurance premium on government bonds picked up rapidly for several countries, indicating that the market participants had revised their expectations about these governments’ ability and/or willingness to honour their outstanding debt.