In addition, if market participants tend to see the monetary union as a system of mutual financial assistance in the event of serious trouble, doubts about a country’s solvency could spread more quickly to the other member states. This is why common fiscal rules are an integral part of the Treaty establishing the monetary union.
ECB president Mario Draghi once aptly summed up the rationale behind these rules as follows: “The consequences of misguided fiscal policies in a monetary union are too severe to remain self-policed.” The importance of sound fiscal policies from the perspective of a central banker also stems from the ability of monetary policy to accommodate high levels of public debt.