This should be a good time to redesign the EU’s maligned fiscal rules. Much has changed in the past few years. Above all, the desire for public and private investment – ??to accelerate the decarbonisation of the economy and its digitisation – is widespread, both in Brussels and in capitals.

The pandemic has also reshuffled old politics.This Rubicon for cross-border transfers and joint borrowing has been crossed. The apparent success of massive deficit spending in 2020 reinforces a lesson European policymakers grudgingly began to learn after previous crises: a strict approach to budget discipline damages, rather than helps, fiscal sustainability, economic growth and political cohesion.

The changing of the guard in important countries creates an opportunity to see old archives with new eyes.Berlin’s new government seems Committed to investment-intensive growth Either domestically or in Europe.similar openness Can be detected in the Netherlands and elsewhere. Mario Draghi’s premiership in Italy reduces North-South mistrust. The same goes for the implementation of the co-funded national recovery plan, which is widely regarded (so far) as a success, except in countries bent on undermining the EU’s legal order.

But no one wants to bet on a political deal on a major overhaul of fiscal rules, which were relaxed at the start of the pandemic and will be reintroduced next year.

So we live in a double paradox. EU countries are collectively pursuing better economic policies than they have in a long time. That’s true in the short term — the pandemic’s impact on jobs, income, and productivity has been far smaller and shorter in duration than we have reason to fear — and it’s also true in the long run. On both counts, however, such progress will be limited by the current fiscal framework—especially its stringent requirements to reduce the public debt burden.

Treasurers are acutely aware of the risk that withdrawing fiscal support too soon could derail the recovery – in fact they have Coalition recommends a ‘moderately supportive fiscal stance’ This year for the entire euro zone. The commitment to investing in green and digital transformation while ensuring it doesn’t leave people behind is strong. However, in a legal system that matters more than anything else, rules cannot be ignored.

There are three ways to get out of this predicament. One is to make economic policy subject to the old rules, and legal relations based on supporting European projects must take precedence. But previous crises have shown that if you try to do that, you sacrifice economic performance and political cohesion.

The next step is to expand the rules sufficiently to allow the desired policy. As German Chancellor Olaf Schultz likes to point out, the fiscal framework has proven its flexibility. Its suspension can be extended.The European Commission has a great power of interpretation and can Release of looser guidance As for how Brussels will judge national policy compliance with the rules, reward growth-friendly investment and reduce belt-tightening demands.

This has its own risks. Governments find it convenient to abdicate any responsibility for EU-wide policy coordination; opposition parties will accuse them of capitulating to Brussels. Divisive accusations against other member states could easily intensify again as the outbreak eases. But if the government cannot agree on a third option: radically changing the rules, then something like this is the most likely outcome.

The reason it is so difficult is that there is little clear thinking about what the rules are supposed to achieve. The traditional economic arguments seem outdated: Excessive spending has proven to be less risky than beggar-thy-neighbor tightening; interest rate pressures from state borrowing are nowhere to be seen; there is now a rescue fund to address the refinancing crisis.

Likewise, current rules won’t help address today’s biggest economic challenges, which, like it or not, require more active national policy And arguably more public borrowing than when the rules were originally created. The best prospect for reform is for leaders to first agree on what the rules will be used for, and to derive new rules from an understanding of which economic policies will achieve the broader sustainability implications they are now committed to.

France and Italy proposal There are benefits to backing certain types of investments. Those who oppose it have a duty to do the same.

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