We estimate a two-region model of the Euro area, with the purpose of identifying the shocks that caused the 2008–2009 recession and the subsequent 2010 sovereign bond crisis. One striking result is that both crises were demand-driven in the core Euro area countries, whereas region-specific permanent technology shocks explain most of the output growth slowdown in the peripheral countries. Adverse technology shocks became particularly important during the sovereign bond crisis. This is in line with cross-country evidence on the effects of sudden stops.