As we discussed earlier, this is even more important in the current low interest rate environment. The activation of the general escape clause allowed for this flexibility during the early stage of the pandemic. And it may very well be needed in the face of another extreme event in the future.
But a suspension of all fiscal rules should not be our only tool to achieve a balanced policy mix to deal with economic shocks. That’s because the emergency clause also has drawbacks. The uncertainty about whether and when the clause is going to be activated makes the framework less predictable, and could discourage governments from engaging in countercyclical spending.