Hello D,

Without going into too much detail. In most nations interest rates are all determined relative to the interest rates that the government pays. So in Europe lower interest rates in Portugal, Ireland, Italy, Greece, and Spain brought about by the adoption of the Euro led to lower consumer interest rates. Additionally, because interest payments were all denominated in a common currency it made it easier for, say a Dutch bank, to lend money to an Irish borrower. In other words, the transaction costs decreased so more loans were able to be issued. Further, higher volumes of loans all denominated in Euros facilitated securitizing these loans into packages for investors to buy. That extra money raised in capital markets, in turn, allowed for even more low cost loans to be made. Who financed these loans? Ultimately all financing comes from the public, but who specifically? Pension funds, insurance companies, global banks, global investment managers (especially those in fixed income), other nations, and individual investors.

Thanks for the questions and the feedback.

With smiles,

Jason