Both of these crises are interwoven in a kind of feedback, where the weakness of public finances creates negative impulses to the situation of the banking sector, and the unstable financial and capital position of European banks dramatically limits the possibilities and room for maneuver to address the fiscal and economic problems of the eurozone.

This paper presents the characteristics of both the above crises and their interdependence, as well as a brief introduction to the consequences of the current crisis for the Polish banking sector. In principle, the paper does not contain the original author’s evaluation and analysis, but is rather an overview of key information and views on the crisis in the euro area, as presented in the recent international economic and financial literature. The purpose of this paper is to initiate discussion on these subjects in the academic and banking world, treated as the first stage of a longer research project conducted by IBnGR.

Title of paper might suggest that the direction of the cause-and-effect relationship leads from the crisis of government debt to the banking crisis, but such an understanding would be a significant over-simplification of the problem. The title expresses only the fact that in the current phase of the global financial crisis, which continues with a varying intensity since 2007 and undergoes a progressive transformation, the main focus of the event has become a government bond market crisis in euro area countries. This market should be treated simply as part of a highly integrated international financial system.