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During the euro-area crisis, interest-rate spreads between the sovereign debt of peripheral countries and Germany widened most sharply when it was feared that one or

During the euro-area crisis, interest-rate spreads between the sovereign debt of peripheral countries and Germany widened most sharply when it was feared that one or more countries might leave the euro area. These spreads narrowed when ECB actions restored confidence in the monetary union. What accounts for this pattern?

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