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A new European Stability Mechanism staff discussion paper propose a new 100% of GDP government debt reference limit to replace the 60% in the current Stability and Growth Pact. The paper's authors also proposes an expenditure rule that would track trend growth, saying that along with a 3% deficit limit and a primary balance rule, this would allow for countries with debt over 100% of GDP to reduce the gap by 1/20th a year.

"Post-pandemic fiscal rules should provide credible policy guidance. Well-designed and transparent rules can boost fiscal performance and prevent policy missteps. In the medium term, revised rules can help phase out pandemic-related discretionary fiscal measures. In the long-term, they can strengthen commitment to fiscal positions stabilising public debt levels."

The paper follows last week's EU Commission relaunch of the consultation on EU economic governance.