Strict reinforcement of the no-bailout clause

Strict reinforcement of the no-bailout clause

We would like to see strong reinforcement of the no-bailout clause, which would discipline countries of the Eurozone and the capital markets providing loans to those countries. When it is clear that Member States will not be saved after fiscal profligacy, those Member States would be far less likely to go on a borrowing rampage. Moreover, capital markets and lenders will also be more cautious when providing loans or buying government bonds.


The dubious legality of the no-bailout clause and the assumptions that someone will save troubled Eurozone Member States have led to lax fiscal discipline, both on the side of the Member States and the lenders. The existence of a bailout mechanism is problematic, because it increases the incentive of Member States to borrow heavily, knowing that they will be bailed out in the end. We want to treat this problem at its very root, meaning to take away the incentive of fiscal profligacy.

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