The recent financial turmoil has taken a heavy toll on the global economy and had a devastating effect on public finances. Following the crisis, a number of Southern European countries have found themselves with a problematic public sector.

The difficulties faced by these countries led some to blame hedge funds for speculative attacks on credit default swaps. On this basis, in late 2009 and early 2010, individual country governments, the European Commission and the European Central Bank voiced a severe criticism on hedge funds and other financial institutions for speculative attacks on credit default swaps.

A team including Dr Manthos Delis, Senior Lecturer in Banking, used data from a number of these countries, including Greece, Italy, Portugal and Spain to provide the first empirical assessment of the dynamic interrelation between government bond spreads and their associated credit default swaps.

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