The recent discussions within the European Council show a lack of ambition compared to the already timid proposals of the Commission; although the designed new fiscal framework might speed up a faster and broader-based imposition of sanctions on countries that do not comply with the SGP rules. It is to be hoped that the European Parliament will revert to an automatic sanction mechanism.
Using interest rates to lean against excessive borrowing is undesirable when inflation is low, as it was then, and so the macro-prudential policies we use to mitigate boom & bust cycles in the economy provide additional freedom for monetary policy to do its role whilst containing risks from excessive leverage.