New data shows that Spanish and Italian banks have been buying such debt in record amounts after the European Central Bank lent financial institutions billions in cheap money over the winter in the hopes that banks would buy more bonds from their own government to tamp down national borrowing costs, which had earlier shot toward the high levels that forced Greece to take a bailout.


But while the purchases pushed down national borrowing costs, and have so far helped Spain and Italy avoid asking their European partners for a financial lifeline as Greece did, the effect has been to raise new risks by tying the health of the banks to the fate of their governments.

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