The purpose of this study is to evaluate the impact of the country risk factors on the dispersion of the cost of bank borrowing within the euro area, during the period of the global financial and Eurozone debt crises. The main aim is to empirically evaluate the degree to which the cost of borrowing differentials of euro area countries can be explained by changing dispersion in country risk (measured by government bond spreads). The results using rolling estimations suggest that the impacts of bond yield spreads are not such a significant determinant of the observed dispersion of the cost of borrowing, a dispersion that has been worsen after the outbreak of the global financial crisis and the subsequent euro area debt crisis. Even in the cases where a significant association is found for some countries, it seems that it is weakening as we move further away from the beginning of the turbulent periods.