This certainly prevented the crisis from escalating. But in a currency union in which monetary policy is centralised and fiscal policy is decentralised, joint liability can also create false incentives. More specifically, there is a risk that mutualising liability will further increase euro-area countries’ existing incentive to run up debt.
If action is taken at the national level but responsibility is taken at the European level, the euro area will never achieve long-term stability. Instead, it could lose its footing because policymakers rely on safeguards at the European level. Nor would investors properly factor the potential risks into the interest rates they demand.