Article 125 [“No-Bail-Out” Clause]

Article 125 TFEU prohibits any transfer of debt from a MS to the EU or another MS. This prohibition applies without prejudice to the mutual guarantees set up for the purpose of financing joint transnational projects between a number of MS. This “no bail-out” rule supplements the prohibitions on monetary financing for the MS and their privileged access to the financial institutions defined in Articles 123 and 124 TFEU respectively. Together, these three rules make the MS, as issuers of debt, subject to market discipline. Articles 123 and 124 TFEU remove from the State its traditional means of financing, debt monetisation by the central bank or compulsory saving in order to force it to turn to the markets to meet its financing needs. Their purpose is to make sure that the MS follow a sound budgetary policy. In so doing, they contribute “at Union level to the attainment of a higher objective, namely maintaining the financial stability of the monetary union”.