Unsustainable fiscal positions can no longer be punished by high credit risk premiums. This redistribution aggravates exiting moral hazard problems and undermines the long-term fiscal sustainability in the euro area. On top of this, via common bonds strong and weak countries enter into mutual obligations of very large size. This carries the risk that the sound countries will be taken hostage, e.g.
to accept a gradual erosion of commonly agreed fiscal rules. Thirdly, it is not clear at all whether an introduction of Eurobonds would really help to resolve the sovereign debt crises. Part of the government debt in the euro area would of course be converted into common euro area bonds.