One example is the notion of “structural budget balance” which Member States are obliged to meet. The structural budget balance is, in effect, the budget balance corrected for the effects of the business cycle. The objective of the correction is to allow fiscal policy to play its role in mitigating possible economic shocks.
As a result, it is appropriate for policy to return to more normal settings.3 At the same time, we do not have excess aggregate demand in the euro area – consumption and investment are both still below their pre-crisis levels – and the war is creating a challenge for monetary policy by tempering growth rates and pushing up inflation further.