The acute phase of the crisis is clearly over – for now. There are some signs of a normalisation in the inter-banking market. Sovereign spreads have come down. Italy and Spain will both manage to fund their fiscal deficits until next year. The European Central Bank’s longer-term refinancing operations have propped up the banks. The new Outright Monetary Transactions programme, if it is ever activated, will prop up the sovereigns. If you thought of the lethal interaction between banks and sovereign as two drunks in a pub propping each other up, the ECB has given them separate crutches. They can walk. Does this mean that the crisis is over?

If you step back from the latest events and consider the bigger picture, you always come back to the same questions. Is this a liquidity crisis only – in which case the measures taken should be sufficient? Or is it a solvency crisis?

The ECB’s support cannot help in the latter case because the central bank is not allowed, by its own legal definition, to write off or participate in a restructuring of any debt it holds. In case of a disorderly default, the country would lose access to the ECB and would probably have to leave the eurozone. The ECB’s programmes are premised on the idea that this is not going to happen.