It doesn’t work.” In the context of European monetary union, the liability principle is the reason why the Maastricht Treaty explicitly rules out the assumption of any member state’s debt by the European Union or by other member states – that’s the so-called “no bail-out” clause – or even by the Eurosystem, which would constitute prohibited monetary financing.
Only a credible no bail-out clause and the prohibition of monetary financing enforce the liability principle, which itself is the cornerstone of market discipline. And market discipline is, in addition to the fiscal rules, the second safeguard of sound public finances in a monetary union.