The ECB has published a working paper on the euro area sovereign debt crisis. The paper states that, since the intensification of the crisis in September 2008, all euro area long-term government bond yields relative to the German Bund have been characterised by highly persistent processes with upward trends for countries with weaker fiscal fundamentals. Looking at the daily period 1 September 2008 – 4 August 2011, the paper notes that three factors can explain the recorded developments in sovereign spreads: (1) an aggregate regional risk factor; (2) the country-specific credit risk; and (3) the spill-over effect from Greece. Specifically, the paper argues that higher risk aversion has increased the demand for the Bund and this is behind the pricing of all euro area spreads, including those for Austria, Finland and the Netherlands. Country-specific credit ratings have played a key role in the developments of the spreads for Greece, Ireland, Portugal and Spain. Finally, the paper concludes that the rating downgrade in Greece has contributed to developments in spreads of countries with weaker fiscal fundamentals: Ireland, Portugal, Italy, Spain, Belgium and France. The ECB has indicated that the views expressed in the paper are those of the authors and do not necessarily reflect those of the ECB.