The Impact of Pandemic Crisis on Fiscal Sustainability

The pandemic crisis has produced an important transformation of the fiscal framework of European Union states. Thus, the necessity to finance expansionary fiscal policies implemented by governments has resulted in an impressive increase in budgetary deficits and public debts in EU countries. The rise in public indebtedness requires a complete rethinking of the actual fiscal rules. There have been proposed several modifications for the fiscal framework, to consider the high levels of debts and deficits, which cannot be reverted to pre-pandemic values. We will analyze in this paper several proposals to change the actual fiscal rules in a period of low interest rates, which allow the accumulation of further indebtedness. The actual fiscal rules, such as the structural budget balanced rule, the debt rule, or the expenditure rule, are no longer functioning considering the necessity to reach sustainable fiscal positions.