It is therefore essential that the binding force of the rules is additionally shored up by the disciplining effect of the market. In other words, interest rate levels have to be aligned more strongly again with the risks in government budgets. The only way to achieve that, however, is if the no bail-out clause in the Maastricht Treaty gains more credibility again.
Investors have to perceive a more credible threat of losing their money if they buy bonds from governments that have unsound public finances. One proposal put forward by the Bundesbank thus envisages changing the contractual terms for sovereign bonds in the euro area by introducing an automatic maturity extension for them as soon as the issuing government applies for an ESM programme.