Via Goldman:
Today, the European Commission issued guidance on the conduct of Member States’ fiscal policy with the aim of preventing “a premature withdrawal of fiscal support, which should be maintained this year and next”.As expected, the guidance includes a proposal to extend the general escape clause that suspends the EU’sfiscal rules for all Member States to 2022 conditional on the speed of economic recovery. In practice, such an extension would alleviate adjustment requirements for Member States whose 2022 fiscal position breaches the Stability and Growth Pact’sdebt and deficit criteria. The Commission’s current forecast sees 17 out of 27 EU Member States breaching the 3.0% deficit criterion in 2022.
The Commission’s communication stresses that the decision on the extension or deactivation of the general escape clause should be based on quantitative indicators, such as the “level of economic activity in the EU or euro area compared to pre-crisis levels”. While today’s communication does not amount to an official recommendation, the Commission has signalled that it expects the escape clause to apply in 2022 and to be deactivated as of 2023, consistent with its current projection that the EU will recover its 2019Q4 output in mid-2022 (Exhibit 2).
