| Resumo: | This paper studies financial market linkages in Europe throughout the lifetime of the Euro. In considering the national equity and sovereign debt markets of the seven biggest economies in Europe, I find important developments in cross-country as well as cross-asset linkages. There is evidence for a revival of country-specific risk, causing a differentiation between riskier “peripheral” Euro area countries (Italy, Spain) and presumably safer “core” countries (Germany, the Netherlands). As a consequence, a “flight to safety” phenomenon can be observed. Interestingly, there is evidence that these “flight to safety” capital flows partially revert themselves in periods of relative stability in European financial markets.
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