If a country were to get into difficulties, the market would then be able to bear the losses without putting the burden on taxpayers. At the same time, banks would develop an interest in sound public finances. Public finances that were not sound would be punished by the market – it would demand higher interest rates, for example.
This would then force governments to keep their finances in order. And we can pursue the logic of this further. A capital markets union would offer the possibility to share risks – and to do so across borders. In a truly European capital market, risks could be borne by many shoulders. In this context, I am not only thinking of governments, banks and bonds.