First, ECB staff analysis suggests that, under the current rules, requirements to reduce debt in excess of the 60% threshold risk creating a vicious circle between monetary and fiscal policy when inflation is below our medium-term aim – which is precisely at a time when fiscal support is most needed.
[17]  Correcting fiscal adjustment requirements for deviations from the ECB’s inflation aim would help break this circle. Simulation analysis suggests that such a “nominal” cyclical adjustment would significantly smooth adjustment requirements (see right chart slide 9). [18] It would create fiscal space and support price stability without endangering debt sustainability.