If investors believe that they themselves could face potential losses, it was assumed that they would demand higher interest rates in return for the increased risk. The guiding principle of monetary union was therefore based on individual responsibility: both on  1  Bianchi, Francesco, and Leonardo Melosi (2012), Dormant Shocks and Fiscal Virtue, Duke University, mimeo.
BIS central bankers’ speeches  3  the part of the member states, by assuming individual responsibility for the consequences of their policies, and on the part of the financial market agents, by assuming individual responsibility for the consequences of their investment decisions. Despite these rules, however, member states’ borrowing has not been effectively curbed since the introduction of the euro.