Bonds – These are quantities of government debt sold by a government to the investing public at home and abroad. They have nominal values printed on them, together with returns (coupons) that are fixed percentages of  the nominal value.

Yield  - This is the return on a bond as a percentage of the market price. If the bonds become less secure in the eyes of the investing public, the price falls and the yield rises. Thus a rise in yields on a country’s bonds is often a statement about its creditworthiness. However, yields might rise as the result of other economic problems in the country concerned.

Coupon – This is the return (to the investor) on a bond as a percentage of its  nominal value. Countries are issuing new bonds on a weekly basis to make up for bonds that are maturing on a weekly basis. The coupon that the country puts on new bonds will vary according to current yields. As yields rise, so will coupons. Thus a rise in the yields on a country’s existing bonds will result in a rise in the cost of that  country’s new borrowing.

Quantitative Easing – This is the process by which a country creates new money to cover any excess of spending over revenue, instead of borrowing that money to cover the deficit. It is now created electronically but it is often referred to as a government “printing new money”. Nationalists traditionally favour necessary new money (to purchase any growth in Gross Domestic Product) to be in the form of quantitative easing rather than being borrowed at interest. However, a lot of modern QE is used to purchase that government’s own debt (for nothing!).
The  Eurozone has not yet engaged in Quantitative Easing but the European Central Bank is rumoured to be considering doing so.

Open Market Operations – This is a rather dated term referring to a government selling treasury bills held by the public to reduce the amount of money deposited with the banks, in order to reduce the amount of money that the banks can create and lend. It could alternatively involve a government buying treasury bills to increase the amount of money deposited with the banks and thereby increase the amounts that the banks can create and lend.  

This term is now used in European Central Bank parlance as the purchasing of sovereign debt (the bonds of indebted countries) for a quite different purpose – to push up the market price, instil confidence in the country’s creditworthiness and reduce the yield on its bonds.

Devaluation – This refers to the reduction of the value of a country’s currency, either as the result of supply and demand or as the result of a deliberate government policy under which one ‘pegged’  lower exchange rate is substituted for a previous higher exchange. The demand and supply of a country’s currency is closely tied to the demand and supply of that country’s imports and exports. As a country experiences a balance of payments deficit (importing more goods and services than are being exported), so the value of its currency is likely to fall (or devalue). This makes exports cheaper and imports dearer, which will tend to correct the balance of payments deficit.

The value of a currency can also fluctuate as the result of investors moving capital sums into or out of a currency. This might be move money to a country that is seen as safer or it might be in response to higher interest rates.

PIIGS Countries – This is an acronym referring to the countries in the Eurozone for which the value of the Euro is too high. They are Portugal, Italy, Ireland, Greece and Spain.