turns out that, in contrast to the government bond yield spreads, agency yield spreads remained remarkably stable. this suggests that there were no significant changes in the perceived relative credit see j. ejsing and w. lemke ( 2009 ), “ the janus - headed salvation : sovereign and bank credit risk premia during 2008 – 00 ”, ecb working paper no 1127. quality of the sovereign issuers, but market liquidity factors influenced favourably the german government bond yields. iii. 3 the role of individual sovereign issuers ’ credit risk let me turn to the third factor that has shaped developments in the euro area government bond markets, namely country - specific sovereign credit risk. after reaching new peaks at the beginning of 2009, sovereign bond yield spreads have followed a downward trend, but with a few exceptions. ( slide 5 ) for some euro area member states, notably greece, they have widened again since mid - november 2009. the large and persistent increase in the spreads in the case of greece has been driven by concerns regarding its long - term fiscal sustainability as well as worries about the country ’ s ability to refinance its maturing government debt this year. following the announcement of additional fiscal consolidation measures by the greek authorities in march and the statement by the heads of state and government of the euro area later in that month, greek bond spreads narrowed somewhat. but re - ignited market concerns on the macroeconomic outlook and the government ’ s refinancing requirements drove spreads substantially higher over the past few days. contagion effects to other countries via the government bond markets have been limited so far. the statement on the support to greece by euro area member states issued yesterday had a significant favourable impact on the greek sovereign spreads today. overall, government bond yield spreads in some countries remain at relatively elevated levels compared to their pre - crisis levels. iii. 4 the relation between corporate and sovereign credit risk premia before concluding, i want to briefly focus on the relationship between sovereign and corporate credit risk premia. should we expect adverse spill - overs from developments in sovereign credit spreads to the relative costs of corporate financing across euro area countries? in particular, in the european monetary union is it still the case that sovereign credit risk premia provide a lower bound for credit risk premia of corporations residing in the respective country? as there are no intra - euro area exchange rate risks and the cross - country money market volatility is very small, these sources of cross - country differentials in

so as to reap the benefits of integration and development for efficiency and growth, while safeguarding financial stability, by addressing potential systemic risks that might stem from these processes. the recent experience, the ongoing policy debate and economic research converge on the need for greater transparency, reduced financial product complexity, improved corporate governance and more effective risk management. moreover, the crisis revealed the need for a strengthened regulatory framework, enhanced macroprudential oversight, intensified micro - prudential supervision and better cross - border crisis management and resolution regimes. the list is long, but it is vital that progress continues to be made on all relevant fronts. a lot has been achieved so far, but much more remains to be done. in particular, the global regulatory reform underway and the new eu supervisory framework will greatly contribute to both financial stability and increased financial integration. the european system of financial supervisors will support financial integration by promoting a single set of micro - prudential rules and the equal treatment of market participants. in parallel, the european systemic risk board will foster financial integration by safeguarding financial stability that allows market participants to better exploit cross - border opportunities. iii. the impact of the crisis on the sovereign bond markets in the euro area let me now turn to the second issue, namely the impact of the crisis on the sovereign bond markets in the euro area. this has been significant but heterogeneous, as demonstrated by diverging yield spreads. moreover, it has varied over time reflecting the effects of different factors. the major phases in the movements in intra - euro area government bond yield differentials since the outbreak of the crisis are broadly familiar. ( slide 1 ) therefore, i will abstain from a chronological description of developments and will focus on three key factors that shaped euro area sovereign bond spreads at different stages : first, the risk transfer from the financial system to the government sector ; second, the importance of market liquidity premia ; and third, the emergence of more country - specific sovereign credit risks. iii. 1 risk transfer from the financial system to the government sector in march 2008, euro area government bond spreads showed the first discernible increases since the beginning of the crisis in summer 2007. thereafter, spreads abated somewhat but did not return to pre - crisis levels. intra - euro area sovereign bond spreads picked up appreciably after the bankruptcy of lehman, reflecting “ flight to quality ”, but they widened substantially in october 2008, when eu governments announced large fiscal stimulus packages and comprehensive measures to support