Desactivation of the SGP general escape clause?
© 2021 EPFL
On 23 March 2020, the Council activated the General Escape Clause (GEC) under the Stability and Growth Pact (SGP) to provide Member States with the necessary fiscal space to respond to the Covid-19 pandemic. Prof. Luisa Lambertini published a report for the European Parliament's Committee on Economic and Monetary Affairs to analyses the conditions under which the GEC should be desactivated.
"When and how to deactivate the SGP general escape clause?"
Abstract
This paper analyses the conditions under which to lift the SGP general escape clause (GEC). It is advisable that the timing for lifting the GEC be Member State-specific and contingent to the Member State’s return to its pre-Covid-19 output gap or real GDP level. Medium-Term B u dgetary Objectives should be redesigned to take into account the debt-to-GDP level and the interest rate-growth differential. Maintaining government debt yields at low levels after the pandemic would make debt reduction less costly in terms of output.