And this is indeed by design. The construction of the euro area – the monetary financing prohibition enshrined in the EU Treaty, the “no bailout clause” 12 – is deliberately intended to encourage markets to differentiate between euro area sovereigns based on their fiscal sustainability.
IV. Adapting to the New Normal So far, I have touched on the economic perspectives and on policy challenges. These factors will in part shape the post-pandemic new normal, although exactly how remains to be seen. One thing for certain, however, is that the world we live in will not be the same as that before the pandemic.