Thread by @VMRConstancio

Suspension of EU budget rules for 2021 was expected and justtified. ft.com/content/d7c41c… “Mr.Dombrovskis said that a focal point of the review, launched in February, would be how to reduce reliance on metrics measuring the output gap ...and its structural balance” /1

The elimination of the outpup gap and structural concepts, due to their elusive and changing measurement, has to be watched carefully. Its introduction was an effort to eliminate the huge procyclicality of the initial rules. ../2

The FT mentions the possibility of introducing some sort of “golden rule” excluding investment, which would be welcome. But the FT also points to considet the proposal by the European Fiscal Board that unacceptably tightens the present debt rule .../3

The present debt rule of reducing its ratio to GDP in excess of 60% by 5% each year is however the first thing to relax after the new debt legacy of the crisis. To keep it and eliminate the cyclical adjustment, would imply too tight fiscal policy before our economies recover /4

We must prepare for a tough debate on the necessary revision of the European fiscal rule. We need to achieve a better balance between its crucial short-term anti-cyclical role and a long-term debt stabilisation compatible with a secular stagnation and low inflation regime. 5/5

For a first take on the European fiscal rule reform and the crucial need to accompanied it with a European Stabilisation Fund, building on the recent #EUnextgeneration deal, see link.springer.com/article/10.105… More detailed discussion is necessary, e.g. about the treatment of investment