This weakens the underlying principle of European Monetary Union that each country has to bear the full consequences of its own fiscal policy. Contrary to what is actually needed in order to overcome the sovereign debt crisis, we risk seeing the propensity for excessive deficits rise even further in the future.
Germany’s debate about the way forward in the crisis is therefore motivated by a serious concern for the stability of monetary union. We will not be able to regain stability within EMU without re-establishing the credibility of its framework.