Progress has been made in overcoming the debt crisis in the euro area, but there is still a need for further adjustments. Efforts to consolidate public finances appear to be flagging and are meeting with political resistance. Fiscal policy governance, or the coordination of fiscal policy and the monitoring and correction of debt policy, is seriously flawed. The European Fiscal Compact stipulates that member states reduce their budget deficits, or deficits adjusted for cyclical effects, towards an upper ceiling of 0.5% of GDP. In reality, however, structural deficits are rising in many countries. Further reforms to fiscal policy rules are urgently needed as a result. On no account should these reforms include a further loosening of deficit rules. Accountability bonds would prevent individual member states from passing on the costs of excessive debt to the community of Eurozone member states via collective liability within the framework of ESM programmes or bond purchases by the ECB. This would reinforce fiscal policy coordination in Europe and supplement it with an element of market discipline. […]