Goldbach, RomanRomanGoldbachFahrholz, ChristianChristianFahrholz2018-11-072018-11-072011https://resolver.sub.uni-goettingen.de/purl?gro-2/21388Sovereign creditworthiness within the euro area hinges upon the credibility of the Stability and Growth Pact (SGP). We analyse whether political events that worsen the SGP's credibility result in a shared default risk premium for all euro members, therefore leading to a joint deterioration of creditworthiness. We especially examine the decisions and statements of the Commission and the Council of Economic and Finance Ministers. Analysing daily data through the 1999-2005 period with an ARMA-GARCH model, we find the Commission plays a decisive role in affecting investor evaluations, where its credibility-strengthening decisions decrease volatility and statements signalling a weakening of fiscal credibility spark uncertainty on financial markets. Our results stress the importance of creating credible fiscal institutions that preserve sovereign creditworthiness within the euro area.Goescholarhttps://goescholar.uni-goettingen.de/licensejournal_article10.1177/1465116511413950000298256600002https://resolver.sub.uni-goettingen.de/purl?gs-1/13081