With the exception of Greece and perhaps Portugal, neither the lack of fiscal discipline nor excessive sovereign debt triggered the crisis. Prior to the crisis countries such as Ireland and Spain did not violate the Stability and Growth Pact (in contrast to Germany and France).
The main cause of the crisis in these countries was rather the excessive indebtedness of private households and companies due to a credit-fueled property-price bubble. When this housing bubble burst as a result of the global financial meltdown, governments had to raise large funds to cushion the economic and social consequences. At the same time, extensive financial measures were taken to prevent banks from bankruptcy and the financial system from collapse. Both policies have driven government debt significantly upward. High government debt is therefore in most cases only a symptom of a deeper problem, and it comes therefore without surprise that the current crisis management approach that has focused almost exclusively on these crisis symptoms has not proved successful.
An unholy alliance between governments and banks has exacerbated the crisis since banks are the main buyers of government bonds. On the one hand, banks that hold government bonds are likely to face massive write-downs or even bankruptcy if government bonds are threatened by a (partial) default because the issuing country is heavily indebted. On the other hand, banking crises have a direct impact on public finances, since the state is often forced to take on risks from the banking sector. Some banks have become too big and too important for the banking system that governments cannot afford to let these credit institutions fail without risking a collapse of the whole financial system (Too-big-to-fail problem). In fact, the balance sheets of many banks and thus the risks involved have become so large that the country itself is threatened by bankruptcy. Therefore, we need a genuine banking union that breaks the vicious circle between banks and governments effectively.