Taken in isolation, such proposals are therefore unlikely to resolve the tension between market discipline and safe assets in the euro area. And this matters, for two reasons. First, because sovereign debt provides a safe asset for the financial system, which is increasingly dependent on a sufficient supply of such assets. And if sovereigns are not supplying safe assets, then someone else has to.
Second, because sovereign debt provides a safe liability for the government through which it can stabilise the economy. And if governments are unable to perform this role in the euro area, there is insufficient stabilisation at the national level, and by implication also for the euro area as a whole.