ﬁnancial institutions. in the counterfactual case without any crisis - related support to the ﬁnancial sector, general government debt relative to gdp would have been more than 4 percentage points lower in 2017 in the euro area ( left panel ). in germany, this gap amounted to nearly 12 percentage points in 2010 ( right panel ). almost ten years after the crisis, in 2017, the gap still stood at 6 percentage points. rescue measures such as capital injections or explicit government guarantees can have a pronounced and persistent effect on government ﬁnances. the long - term net effect depends on the speciﬁc form of intervention and the recovery of markets. if, for instance, governments have acquired equity stakes in banks and the market recovers, net cost of interventions decline over time and may even turn into net beneﬁts. if, however, the public sector issues guarantees only and does not participate in the upsides of this investment, costs for the taxpayer might be substantial. b ) the bank - sovereign nexus if risk is transferred from the private to the public sector through some form of bail out, this leaves its trace on balance sheets of governments. indeed, sovereign spreads tend to increase after bailout announcements. as a result, governments themselves might come under ﬁnancial pressure after a bailout. a self - reinforcing feedback loop harbouring risks to ﬁnancial stability and macroeconomic growth may ensue : doubts about government solvency induce a decline in sovereign bond prices and may lead to a deterioration in the credit quality of banks ; bank distress may become more widespread and trigger additional government support measures, calling into question the sustainability of public ﬁnances even more ( deutsche bundesbank 2015a ). this bank - sovereign nexus, which has been exposed not least during the european sovereign debt crisis, has been extensively described in recent literature ( acharya, drechsler and schnabl 2014, alter and schuler 2012 ). the mutual dependence of banks and government has a long history. historically, governments often needed a ﬁnancier to enable warfare and trade. during the 16th century, the role of banks became more important as europe evolved from decentralized feudalism to a more centralized system of a few dominant nation - states ( calomiris and haber 2014 ). but banks were not only important ﬁnanciers, they also helped the sovereign placing its debt on the market. one indication for the close ﬁnancial relationship

sabine mauderer : sustainable finance : political efforts and mature markets needed speech by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the icma and jsda annual green & social bonds conference, virtual event, 13 november 2020. * * * 1 introduction ladies and gentlemen, i ’ m delighted to be part of the icma and jsda annual green and social bonds conference today. i really regret not being in tokyo. i am glad to see that japan, germany and the eu forge an alliance to combat climate change. in his first general policy address, japanese prime minister suga announced the goal of becoming climate - neutral by 2050 – like the eu and germany. today, i will focus on two topics : first, the political effort of germany and europe to push sustainable finance. second, what is needed for a mature sustainable financial market. 2 political efforts of germany and europe to push sustainable finance allow me to summarise recent political initiatives in sustainable finance, starting with germany. germany issued a green bond with a 10 - year term for the first time in september, followed by another green bond with a 5 - year term last week. both issues, with a total outstanding volume of € 11. 5 billion, attracted huge interest among investors. looking back at these successful issuances, i can conclude that it was worth entering the market a little later, but with a tailored approach. germany entered the market with the innovative “ twin bond ” concept meeting market ’ s liquidity needs : each of these “ green bunds ” is twinned with a pre - existing conventional bond with identical features in terms of its coupon structure and maturity. the twin bond concept means that the “ green premium ” is immediately apparent. notably, the yield discount of the 10 - year green bund is around 2 basis points and around 1 basis point for the 5 - year green bobl. looking ahead, the federal government is going to build a “ green curve ” over the entire maturity range of federal securities from 2 to 30 years. a detailed issuance preview for 2021 will be provided in december. apart from the federal government, there are other public issuers in germany who are already active in the market : at the state level, north rhine - westphalia has issued a number of sustainable bonds with a total volume of € 13. 3 billion, making it the top issuer in this segment. state - owned development banks are also a vehicle which can