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Genuine question: What happens with the SGP after Covid-19? Will all MSs be put in an EDP when this crisis is "over", with requirements to reduce deficits below 3% with a 1-yr deadline? 1/9
So far, the Commission has decided 1) that Covid is an “unusual event outside the control of MSs”, and 2) to activate the general escape clause 2/9
The general escape clause did not exist during the last crisis so we don& #39;t know how it works. Does it mean that countries will avoid EDPs even with deficits of 10% of GDP? I doubt it but as I will argue this could be a good thing 3/9
The unusual events clause is powerful: it implies that "healthcare exp and targeted relief measures for firms and workers will be excluded when assessing compliance" 4/9
But, again, I don& #39;t think this will save MSs from EDPs because the rules clearly state that "the deficit value [must still be] close to 3% of GDP" 5/9
So this all means that a majority of MSs will still be subject to EDPs after this crisis, like last time around. Why could this be a good thing? As I argued in a blog post last year, the EDP was meant as a shock absorber. https://bit.ly/2VlOkKv ">https://bit.ly/2VlOkKv&q... 6/9
It was meant to avoid sharp contractions when the nominal 3% limit is hit, and the COM has a lot of flexibility when setting the deadline and the required adjustment 7/9
I& #39;ll let other comment on the political implications of countries stuck in EDPs for the foreseeable future (e.g. EDP just as politically toxic as ESM in Italy) 8/9
What is clear is that Covid poses big questions regarding the fiscal framework, and this was the year that the Commission was supposed to look into how to reform it! 9/9
