The contagion between the peripheral euro-zone countries is still present. Is it rational?

The risk that a very expansionary fiscal policy may return in Italy has led to a renewed widening of Italy’s sovereign risk premia, but also, through contagion, those of Spain and Portugal. Is t his financial contagion, which is still present between the peripheral euro-zone countries, rational? We believe the answer is no, since: Euro-zone banks mainly hold domestic government bonds; Cross-border loans in the euro zone have declined markedly; There would not be any fiscal solidarity between Italy and the other euro-zone countries in the event of a public finance crisis in Italy caused by Italy’s budgetary policy, probably not even via the ECB.