* Investors are desperate to avoid risk – so much so they tolerate burgeoning government deficits and negative real returns to buy UK and US government debt.
* Nowhere has this reassessment of risk been greater than in the euro area. In 2005, the Greek and Spanish governments could borrow money through the bond market for roughly the same interest rate as Germany – around 3.1%. Financial markets treat the different governments of the euro area as if they were the same.
* Today it costs the Spanish government four times as much to borrow as Germany. The Greek government pays eighteen times more than Germany. The debt crisis has led to a dramatic resetting of interest rates across Europe.
* This is part of a wider story. The financial crisis has highlighted the profound – and in some cases growing - differences between the countries of the EU.
* In doing so it has challenged a 50 year process of European convergence and integration, a process which had accelerated from the 1990s.
* 1990 saw German reunification followed, in 1992, by the creation of the EU's single market in goods, services and capital. Five years later border controls between most member states were abolished. In 1999, the Single Currency came into being and in 2004 the borders of the EU moved eastwards to incorporate the nations of Central and Eastern Europe.
* The way financial markets, economists and corporates looked at Europe changed too, with a growing focus on the region as a whole. The cross border operations of multinationals in Europe became increasingly integrated.
* The financial crisis has halted this process and laid bare the differences in indebtedness, financial stability and competitiveness between the countries of Europe.
* As a share of GDP, public debt in Italy, Ireland and Greece is two to three times higher than in Germany or the Netherlands. The EU has had to provide money to shore up the government finances – and the banks – in Spain, Ireland, Portugal and Greece.
* It is indicative of the divergence of fortunes that an investment of €100 in German equities in late 2009 would have grown to €114 today. The same investment in Greek shares would be worth €26.
* Such financial phenomenon reflects differences in the structures of Europe's economies. A study of competitiveness by the World Economic Forum ranks the world's economies on the basis of a raft of data – covering everything from education to innovation and the quality of infrastructure.
* The study finds that the euro area encompasses some of the industrialised world's most - and least - competitive economies.
* The league table covers 146 economies with three euro area countries, Finland (4) Germany (6) and the Netherlands (7) in the top ten. Italy and Spain rank lower, at 36 and 43 respectively. Greece is in 90th place, below many emerging economies including Russia, Albania and Rwanda.
* Trends in labour costs tell the similar story. Since 2000, German labour costs have risen by 4%. Labour costs in Ireland and Italy have risen by almost 40%; in Portugal and Spain by just under 50% and in Greece by 90%.
* The single currency brought ultra-low German interest rates to countries used-to much higher rates, triggering a boom in house prices.
* In the 10 years to 2007, Irish house prices almost quadrupled; Spanish house prices almost tripled. Over the same period German house prices were roughly unchanged. The subsequent collapse in Irish and Spanish house prices has wreaked havoc on highly leveraged banks.
* Not only are economies diverging in Europe, voters increasingly doubt the benefit of European integration. A recent Pew Research Centre opinion poll across eight EU countries found majorities or near majorities in most believe economic integration has weakened their economies – including 70% of those polled in Greece, 61% in Italy and 50% in Spain. Only in Germany (59%) did a majority say their country had been well served by European integration.
* Intriguingly, there was greater consensus on two other questions. When asked which was the least corrupt EU nation the top choice for voters across all eight countries was Germany. When asked which was the hardest working nation the top choice for seven nations was Germany. Those polled in Greece choose Greece.
* The process of economic and financial divergence in Europe could have a lot further to run. Country risk is probably here to stay.