In an unfavourable scenario, a shortage of capital and liquidity causes banks to curb their lending even to enterprises who really have no need to reduce their debt on account of their financial situation. These enterprises then become the collateral damage of a disorderly deleveraging process, with matching consequences for the real economy and, thus, for growth and employment.
The reason why almost all developed countries adopted this law – and why we thankfully copied it – is simple enough: there is nothing that contributes more to growth and economic development, higher employment and growth in exports than stability of prices. This assertion has been proved right in all developed countries in the course of the last two decades.