How can the necessary monetisation of public debt be made compatible with the moral hazard that leads to excessive fiscal deficits?

When governments have to run up very large fiscal deficits during recessions and crises, it is crucial that central banks monetise these deficits to prevent a rise in long-term interest rates and crowding-out effects. But the risk is that the monetisation of fiscal deficits may lead to moral hazard: as governments know that they are insured by central banks against the risk of insolvency, they run up excessive fiscal deficits. In order to make the need for monetisation compatible with the desire to avoid this moral hazard, the solution may be as follows: central banks should be able to monetise cyclical fiscal deficits, but not structural deficits, and the separation of the fiscal deficit between cyclical and structural parts should be made by an independent institution. We illustrate this issue with the situation in the euro zone.