Back then, a different committee, which like the Delors Committee also met in Basel – the Basel Committee on Banking Supervision – made what turned out to be a momentous decision for the euro area. The new common set of international capital rules stipulated that government bonds be valued as risk-free assets, which meant that banks did not have to back them with capital.
This decision affected monetary union in two ways. First, it cast doubt over whether the no bail-out clause could ever be enforced, given the huge differences in economic power and indebtedness between the member states. Second, sovereign insolvency became less credible for reasons of financial stability.