The paper describes the course of the European sovereign debt crisis and the policy reactions of the European Central Bank and European governments until summer 2012. We focus on policy trade-offs and conflicts of interests faced by authorities which made it difficult to coordinate a common policy reaction. In particular, we stress conflicting interests between member states of the Eurozone and nonmember countries. We also consider diverging interests between fiscal and monetary policy, between donating and receiving countries, and between legislative and executive powers within countries.