The fiscal rules have been stiffened, with greater automaticity in the Stability and Growth Pact and the introduction of the fiscal compact. However, as we have learned in the crisis, rules have to be applied to fulfil their purpose, and they can only be the first line of defence.
They need to be complemented by a functioning market discipline to counter the temptation not to observe the rules. Sound public finances will only be achieved if we rigorously set about restoring the balance between liability and control. One way to do this would be a genuine fiscal union. If common debt were matched by common control, incentives could be aligned.