The post-pandemic fiscal rules should be simpler and reflect the changes that have taken place in the macroeconomic environment, he said. the head of the ESM, Klaus Regling.
Speaking to 7th Delphi Economic ForumMr. Regling said that the main goal should be to ensure debt sustainability, although he added that “There are other goals we want to achieve” such as incentives for “good” growth-enhancing spending. Another goal, he said, is to have counter-cyclical policies in both directions.
He referred to the ESM proposal for the revision of the Stability and Growth Pact, which provides for the maintenance of the deficit limit at 3% of GDP but the increase of the debt limit to 100% of GDP together with a rule for increase in public spending.
As he said, the proposal to increase the debt limit to 100% of GDP is justified by the fact that the equilibrium interest rate is now much lower than 30 years ago, when the Economic and Monetary Union of Europe was created. He estimated that this interest rate will increase, but not to the levels it was in the past, as a result of which there is the possibility of servicing a higher debt.
Mr Regling said fiscal rules were needed to coordinate EU fiscal policies, as most public expenditure and revenue was managed nationally.
The EU budgethe said, corresponds only at 1% of GDPadding that there is one discussion as to whether this percentage should be aincrease to 2% or 3%.
He stressed, however, that the goal of making Monetary Union better and less vulnerable could be achieved through other means, such as banking and capital markets, as well as greater joint risk-taking, which in his view included and a macroeconomic stabilization fund.
Concluding his position, he referred to the need for the new fiscal rules to be more credible and not too complex, so that they can be understood by those who practice politics, the markets, but also the public.
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