Such an incentive structure is flawed in so far as it can lead to unsustainable fiscal policies of individual member states which in turn would generate negative spill over effects to the monetary union as a whole and make financial markets to paint other members states with the same brush.
With hindsight, the original attempt to substitute a single government by rules, market and peer pressure has not been sufficient. Although the no-bail-out clause and the Stability and Growth Pact (SGP) were installed to exclude free rider incentives and to ensure the alignment of national fiscal policies, imbalances have emerged and the current crisis has not been prevented.