In other words: equity is a shock absorber, debt is a shock amplifier. 3. Improving the institutional framework of the EMU Ladies and gentlemen Implementing economic reforms at the national or European level as a way of strengthening the euro area is important to improve the cohesion in the euro area, which has undoubtedly suffered from the financial and sovereign debt crises.
What’s also crucial, however, is to make the institutional setting of EMU more stable and to restore trust, for instance by abiding by the agreed rules. The financial and sovereign debt crises in the euro area bore one major characteristic in common: both saw a core economic principle being violated: the liability principle.