IGTA Journal - Winter 2020/2021

29/01/2021 The sovereign-bank-corporate nexus – virtuous or vicious? https://www.ecb.europa.eu/press/key/date/2021/html/ecb.sp210128~8f5dc86601.en.html 3/13 Sources: National authorities and ECB calculations. Notes: Data are based on national sources and cover guarantees committed or announced until the end of 2020. “Remaining envelope” denotes announced envelopes of guarantees that have not yet been committed. Together, these measures helped prevent an abrupt contraction of credit to firms and a wave of corporate defaults, and protected banks’ profitability and balance sheets. Thereby, they created a virtuous circle between sovereigns, banks and corporates ( Chart 3 ). The wide-ranging policy support protected employment and stabilised aggregate demand, thereby substantially reducing the depth of the recession and the risk of scarring effects in the long run. Chart 3 A virtuous circle between sovereigns, banks and corporates IGTA eJournal | Winter 2020/21 | 8