The same would have applied to other countries. This strong constraint – a genuine “debt brake” – would force a country to make an early decision when its public debt gets too close to the agreed limit. Either it would come up with immediate additional consolidation, or it would have to request the support of the European Stability Mechanism to finance its residual deficit.
In this latter case consolidation would happen via an adjustment programme and strong conditionality. In both scenarios, the damaging effects that deferred decisions have on the rest of the euro area – as we have witnessed with every financial assistance package over the last year – would be mitigated. This is not a proposal for so-called Eurobonds.