There is one more key building block in the edifice of the euro area alongside the Stability and Growth Pact: the no-bail-out principle, which forbids member states from assuming liability for the debts of other member states.
The guiding principle of monetary union was therefore individual responsibility: member states’ individual responsibility for the consequences of their policies and financial market agents’ individual responsibility for the consequences of their investment decisions. Despite these rules, however, member states’ borrowing has not been effectively contained. Why not? Mainly, because the rules of the Stability and Growth Pact were not only circumvented but even bent.